Death of a Member: Lord Field of Birkenhead
 - Announcement

Lord McFall of Alcluith: My Lords, I regret to inform the House of the death of the noble Lord, Lord Field of Birkenhead, on 23 April. On behalf of the House, I extend our condolences to the noble Lord’s family and friends.

Family Reunion Visas: Gaza
 - Question

Lord Dubs: To ask His Majesty’s Government what steps they are taking to assist family reunion under the existing visa rules for persons in Gaza.

Lord Sharpe of Epsom: My Lords, in any humanitarian situation, the UK must consider its resettlement approach in the round, rather than on a crisis-by-crisis basis. We use existing pathways in response to events to support British nationals, those settled here and their family members. At present, there are no plans to create a new immigration route for those affected by the security situation.

Lord Dubs: There are Palestinian families here who would urgently like family reunion with their relatives in Gaza on a temporary basis, perhaps modelled on the Ukrainian scheme. People are in real difficulties. Would the Minister care to comment on this? People in Gaza cannot apply for a family reunion visa to join family in the UK without leaving Gaza—but they cannot leave Gaza without a visa. Surely we can do better than that.

Lord Sharpe of Epsom: My Lords, the safety of all British nationals affected by the conflict in Gaza continues to be our utmost priority, but individuals who are not British nationals should apply for a visa to enable them to enter the UK in the normal way—and of course much of the process is online. Individuals who are not British citizens must not travel to the UK without existing permission to enter or remain previously agreed.

Baroness Berridge: My Lords, under the Ukrainian scheme, about 174,000 people came to the UK, and there were extensive categories of family  relationships under that scheme. Can my noble friend the Minister outline whether the same categories apply for this family reunification scheme—and, if not, why not?

Lord Sharpe of Epsom: The Ukraine family scheme was a temporary visa approach rather than a refugee scheme. It is not a route to permanent resettlement; it formed part of the response that we made with other countries to the Russian Government’s unprovoked war against Ukraine. The Ukraine family scheme was developed in close consultation with the Government of Ukraine, who have been very clear that they would like their citizens to return to Ukraine when it is safe to do so. Obviously, similar discussions with the Government in Gaza would not be possible, so the two situations are not analogous.

Baroness Symons of Vernham Dean: My Lords, how many people does the Minister think are online in Gaza to make such an application?

Lord Sharpe of Epsom: I am afraid that I am not terribly familiar with the internet in Gaza.

Lord Purvis of Tweed: Is the Minister aware that the immigration tribunal judges found the Home Office’s decision on this to be “irrational”? The concern is even deeper: the Home Office found itself able to expand the situation for those in Hong Kong who were under fear of persecution, but those who are in Gaza, who are in fear for their lives, the Home Office seems to be completely silent about. Therefore, there is a concern about double standards. Given the requirement on the occupying power, the Government of Israel, to ensure facilitation of the very documentation that the Minister said is necessary, what discussions has the Home Office had with its interlocutors in the Israeli Government to ensure that the visa process for documentation is facilitated?

Lord Sharpe of Epsom: I might dispute the noble Lord’s premise there: I am not sure that I would characterise it as an occupying power. I reiterate what I said earlier: British nationals and those family members can obviously apply using normal routes.

Baroness Gohir: My Lords, has the Minister made an assessment on how many students from Gaza studying here in the UK cannot go back to their homes because their homes have been obliterated? What financial and other support has been provided to those students?

Lord Sharpe of Epsom: I am afraid that I really do not have those statistics at hand, but I shall see if they exist.

Baroness Butler-Sloss: I wonder whether I could interrupt the Question to pay a very brief tribute to Lord Field of Birkenhead. He was a man of the highest integrity, and MP for Birkenhead for many years—but it is his work on modern slavery that I refer to. He was responsible, with my help and that of the  noble Lord, Lord Randall, for persuading Prime Minister Theresa May to have the Modern Slavery Act. He was the chairman of a small group, including me, which reviewed the work of that Act. He will go down in history as a great MP—he was only here briefly, unfortunately, through ill health—and a man who did a great deal on modern slavery.

Baroness Blower: Can I draw the Minister’s attention to the fact that, in his opening question, my noble friend Lord Dubs specifically used the word “temporary”, and then prayed in aid the notion of “temporary” in supporting the Ukraine arrangements. Can the Minister think about the fact that what was being asked was whether we could find space in our hearts and systems to allow for family reunion from Gaza for those people in such dire straits, on a temporary basis?

Lord Sharpe of Epsom: I take the noble Baroness’s point—but, as I say, we keep all existing pathways in response to events under review.

Lord Coaker: I join the noble and learned Baroness, Lady Butler-Sloss, in the tribute that she made to our noble friend Frank Field—I am sure that we all join with that.
Judicial review has found that the family of a Palestinian refugee can apply for a visa without the use of biometrics. The Home Office has said that it is complying with that, so can the Minister outline to the Chamber how it is complying, and whether that applies to all those who should seek a visa application from Gaza?

Lord Sharpe of Epsom: The noble Lord asks an important question. The judgment was handed down a couple of weeks ago; obviously, we have received the outcome and officials will provide advice very shortly to Ministers on how it will impact ongoing and future operations.

Baroness Bottomley of Nettlestone: My Lords, I join the comments about Lord Field. He was my first boss; he paid me £12 a week—I was overpaid. We campaigned for poverty reform with Ruth Lister— the noble Baroness, Lady Lister—the noble Baroness, Lady Meacher, Lord Pakenham, and many others. He was a remarkable man of integrity and persistence, and quite contrary on occasion, but he made a formidable difference—and, of course, he was a graduate of the University of Hull.

Lord Newby: My Lords, can I revisit an answer that the Minister gave a moment ago? He said that Israel was not an occupying power in Gaza. My understanding, by looking at the FCDO website, is that the British Government’s formal position is that Israel is an occupying power in Gaza. Could he take this opportunity either to correct what he said or to explain why the Government have changed their policy?

Lord Sharpe of Epsom: If I spoke incorrectly, of course I correct it. I have not read the FCDO advice, but if that is what it says, then I correct the record.

Baroness Meacher: My Lords, I hope the House will forgive me if I follow the comments of the noble Baroness, Lady Bottomley, about Lord Field. I worked with Frank Field for more than 50 years; he fought more than anybody else I know for people in this country who are poor and disadvantaged, and they have lost a treasure with his death yesterday.

Baroness Bennett of Manor Castle: My Lords, in responding to the noble Lord, Lord Dubs, the Minister referred to the Government making decisions about special visa schemes on a crisis-by-crisis basis. What criteria do the Government apply in making those judgments? Perhaps the Minister can point me to where it is written down, so that we can all see how the Government are making them.

Lord Sharpe of Epsom: It very much depends on the circumstances and other factors. For example, there were separate arrangements made after earthquakes in places like Turkey and Syria.

Lord Morgan: My Lords, is not the policy of issuing visas being used deliberately to cut back the number of immigrants in the country—particularly those from India—with very severe damage to, for example, research groups and universities? Could we have an undertaking that this policy will change?

Lord Sharpe of Epsom: This country is actually very generous: between 2015 and 2023, some 53,574 family reunion visas were granted to family members. We are the third most generous country in Europe, after Germany and Sweden. I do not really know what this Question has to do with universities.

Baroness Smith of Basildon: My Lords, in response to an earlier question, the Minister gave a rather flippant answer when he said that he had no knowledge of the internet in Gaza. The question was serious; I ask that he reflects on his response and writes to noble Lords, and puts a copy in the Library.

Lord Sharpe of Epsom: I disagree. How am I supposed to know how the internet runs in Gaza? It was not a flippant answer; it is factual.

Lord Cashman: My Lords, can I press the Government to find the imagination to help those in Gaza seeking refuge under the most extraordinary, inhumane circumstances? It would do the Government and this country a great deal of good if they could reach out and do something positive.

Lord Sharpe of Epsom: I absolutely take the noble Lord’s point, and we keep all systems and processes under review.

Energy: Welsh Government
 - Question

Baroness Wilcox of Newport: To ask His Majesty’s Government what assessment they have made of the case for stronger consultation and co-operation with the Welsh Government on energy policy to manage overlapping responsibilities in that area.

Lord Callanan: My Lords, the UK Government are committed to strong, effective co-operation with the Welsh Government on energy issues, supporting our shared energy security and net-zero objectives. We engage Welsh Ministers on a range of issues, and our support for the energy transition in Wales includes Great British Nuclear’s recent purchase of the Wylfa site, the ongoing HyNet project in north Wales and supporting the development of offshore wind in the Celtic Sea.

Baroness Wilcox of Newport: My Lords, the port of Milford Haven brings in 20% of the UK’s energy. It is part of our critical UK infrastructure; there are huge opportunities here. The Welsh Government made £1 million available to support that emerging sector, yet the UK Government have just rejected the port’s bid for a share of £160 million to help develop the technology. Can the Minister please explain why the Government have left the port’s hopes on offshore wind high and dry, and what conversations the Government had with the Welsh Government before making this decision?

Lord Callanan: We have regular discussions with the Welsh Government. The noble Baroness neglected to say that Port Talbot was one of the two ports in the UK that was taken forward, with one in Scotland as well. She is being slightly unfair in that assertion.

Earl Attlee: My Lords, is the Minister aware that the UK burns about 50,000 tonnes of coal for the heritage steam sector, but due to the closure by the Welsh Government of the Ffos-y-Fran colliery, that coal now has to be imported from Colombia and South Africa, and increases emissions rather than reduces them? Will my noble friend the Minister have a chat with the appropriate Welsh Ministers about that?

Lord Callanan: The noble Earl makes an interesting point, and I am of course aware of the requirements of the heritage steam sector. We would be happy to take it up with the Welsh Government.

Lord Wigley: Does the Minister accept that over recent years, there has been immense frustration in Wales as projects involving tidal lagoons, floating offshore wind—as highlighted by the noble Baroness, Lady Wilcox, a moment ago—and inland hydro pump storage schemes have failed to progress, partly because  of the split of responsibility between Westminster and Senedd Cymru? If the Government cannot get their act together, will they please devolve full responsibility to the Welsh Government, with the cash resources needed to drive forward these much-needed projects?

Lord Callanan: I am sorry that the noble Lord takes that attitude, because all projects across the UK are evaluated on the same basis. Of course, it is not possible to take forward every project, but the assertion that projects in Wales are somehow discriminated against is just not true. I could give him many alternative examples of projects in Wales—from nuclear, to hydrogen storage, to hydrogen allocation rounds, and CCUS projects—that are going forward.

Earl Russell: My Lords, does the Minister agree with the Institute of Welsh Affairs that Wales should retain, and local communities gain, greater income from the renewable energy developments that they host?

Lord Callanan: I am not familiar with those particular circumstances; I would be happy to chat to the noble Earl about it.

Lord Morgan: My Lords, is this not an opportunity for further investment in west Wales, which by comparison with east Wales, which is closer to the English border, has suffered considerably in economic investment in recent years?

Lord Callanan: There are opportunities with the energy transition for investment in all communities throughout the UK, including, of course, in Wales. There are considerable investments in north Wales, and I mentioned some of those in south Wales as well. It is perfectly possible that onshore wind projects are being taken forward in west Wales, but I am not familiar with that particular area.

Lord Faulkner of Worcester: My Lords, further to the question from his noble friend Lord Attlee, is the Minister aware that his colleague, the noble Lord, Lord Parkinson of Whitley Bay, and Huw Merriman, the Rail Minister, have written a joint letter to the First Minister of Wales asking him whether the Welsh Government would reconsider the closure of the Ffos-y-Fran pit in south Wales? This pit would provide coal for the heritage sector for many years to come. Would he chase that up and see whether we can get a positive answer to it?

Lord Callanan: I thank the noble Lord for that information. I was not aware of that, but now that he has mentioned it, I will of course chase it up.

Crime Statistics: Gender Identity
 - Question

Baroness Fox of Buckley: To ask His Majesty’s Government whether they plan to issue guidance on data to be collected throughout the criminal justice system by sex, as  registered at birth, not gender identity, to ensure consistency of crime statistics across England and Wales.

Lord Roborough: Home Office guidance states that police forces should record an individual’s sex in the legal sense that is based on their birth certificate or gender recognition certificate. Separately, an individual’s gender identity can be collected. The Government have commissioned an independent review into the recording of data on biological sex and gender identity by public bodies and in research. The review is due to report in August and will inform our future approach to recording.

Baroness Fox of Buckley: I am glad to hear from the Minister, who I know is sincere on this, that the Government are taking this seriously, because accurate statistics are vital for evidence-based criminal justice policy. First, can I press the Minister to agree that, at present, official crime data is not accurate, credible or consistent? FoI requests to countrywide police forces reveal that they use a wide variety of differing recording practices; commonly record self-declared gender identity instead of birth sex, which is not the same as on your birth certificate; and that suspected and even convicted male rapists are recorded as female if they say that they are women.
Secondly, does such dubious data undermine public trust in the believability of crime figures, and hinder voters in informed debates about criminal justice? This is especially important in the lead-up to the elections for local police and crime commissioners.

Lord Roborough: My Lords, in answer to these concerns, the Government have recently commissioned Professor Alice Sullivan to conduct an independent review of data collection on biological sex and gender in research and statistics within public bodies. This will report back by August 2024. The Home Office will thoroughly review Professor Sullivan’s findings when they are available, and will take any necessary action to ensure accuracy with regard to police statistics.
The Home Office annual data requirement for police custody, ADR 149, which is a mandatory collection, requires police forces to record the sex of detainees. In providing data to compile the Home Office’s homicide index, police forces are required to record a suspect’s sex—male, female or not known. The suspect’s gender is recorded separately, and only if it is different from their sex.

Lord Sandhurst: My Lords, anyone, including a convicted criminal, can change name and gender, and then obtain a new passport and driving licence and, in effect, change identity for most practical purposes. Ordinarily, in the case of persons who have changed gender, the DBS certificate will display their acquired gender. Is my noble friend the Minister satisfied that it is not possible for a passport and driving licence to be reissued to show the new name and acquired gender—thereby to be presented by the holder to defeat an effective DBS check?

Lord Roborough: My Lords, the Government are satisfied with the steps they are taking. Some offenders, including sex offenders, are required to notify their personal details to the police, with a record of their national insurance number as well as their name, date of birth and bank details. It is a criminal offence not to notify the authorities. Similar provisions apply to registered violent offenders and terrorists. Additionally, the police may place flags with His Majesty’s Passport Office on offenders deemed to pose a risk to the public. Where a registered sex offender notified to HMPO in this manner applies for a passport, or to change their name, HMPO will consult the police before any passport is issued or name change agreed.

Baroness Burt of Solihull: My Lords, would changing the whole system of crime recording, throughout the criminal justice system, not involve an inordinate amount of effort for very little return? I take the point the Minister made about an investigatory review of how recording is done, and I welcome that. Would it not also contravene the Equality Act 2010 and the human rights of anyone with a gender recognition certificate? Does the Minister agree with me that the whole criminal justice system should have other priorities on how it spends its limited resources?

Lord Roborough: My Lords, I see no reason why this needs to contradict the Equality Act, which is clear: it provides protection against discrimination, harassment and victimisation across a number of grounds known as the protected characteristics. We are committed to upholding Britain’s long-standing record of protecting the rights of individuals against unlawful discrimination. We keep any uncommenced provisions in the Act under review, and we are confident that the review that we have commissioned—reporting by August—will be consistent with the law.

Lord Ponsonby of Shulbrede: My Lords, the noble Baroness, Lady Fox, has raised this question on a number of occasions, and the Minister’s answer has been similar, where he has pointed to reviews by the UK Statistics Authority and other experts. Does the Minister agree with me that the issue of data collection goes wider than sex and gender identity? I am thinking particularly of how one’s parentage is recorded, when there are mothers, fathers, sperm donors, egg donors and birth mothers. This is a live issue, where one’s parentage is recorded. Will the UK statistics review take into account these additional complicating factors when considering how data is recorded and presented?

Lord Roborough: My Lords, while I am grateful for the noble Lord’s question, it requires more detail and goes beyond the brief that I have today, so I will write to him.

Baroness Hoey: My Lords, I welcome the review, and we all look forward to the results in August. Can the Minister tell us how we would make sure that the review will apply to the whole of the United Kingdom, including Northern Ireland?

Lord Roborough: My Lords, I apologise, but I need to take that back to the department. I will then write to the noble Baroness.

Lord Jackson of Peterborough: My Lords, on gender data and empirical inquiries, will the Minister give the House an undertaking that we will never again have a situation, as we did with the Cass review, where NHS trusts and clinicians wilfully refused to release data to the inquiry, which was in the public interest and good?

Lord Roborough: My Lords, I am afraid that it is not for me to give that undertaking. I will have to take that back to the department and write.

BBC World Service: Finances
 - Question

Lord Liddle: To ask His Majesty’s Government, following the announcement of the resignation of the Director of the BBC World Service, what assessment they have made of the Service’s finances.

Lord Ahmad of Wimbledon: My Lords, our assessment of and formal agreement with the BBC guarantees the continued provision of all 42 World Service languages. We provide approximately a third of the funding for the World Service, with the remainder funded from the licence fee. Our funding totalled £305 million over the spending review period. The BBC is operationally independent and responsible for setting budgets. The DCMS is currently leading a review of BBC future funding, including that of the World Service, which it is expected to conclude by the autumn.

Lord Liddle: My Lords, I put on record my admiration and respect for Liliane Landor, who has resigned from the job of her life as director of the World Service because she cannot defend the cuts that are now in prospect. Does the Minister agree with me that the World Service is one of our greatest soft power assets? Soft power is crucial to us and to the West, as Russia and China are spending billions and billions on deliberate misinformation. Does he also agree that, given that the value of the BBC licence fee has been cut in real terms by 30% since 2010, the only way to avert this situation is for the FCDO to give more money to the World Service in grant as a matter of urgency?

Lord Ahmad of Wimbledon: I agree with the noble Lord on the value not just of the BBC World Service but of the role that the BBC plays, particularly in the current challenging environments on the global stage. We have seen additional funding and support being provided. The noble Lord will recall that last year we announced an additional £20 million of funding specifically to support the World Service on language  provision. I note what the noble Lord said about future funding, which is exactly why, in a strategic way, our colleagues at the DCMS are conducting the overall funding review that I alluded to in my original Answer.

Lord Hannay of Chiswick: My Lords, having agreed that the World Service is a fundamental part of our soft power, does the Minister also recognise that, if that is so, it ought to be funded on a progressive form of taxation by the taxpayer, and not a regressive form of taxation by the licence fee payer?

Lord Ahmad of Wimbledon: My Lords, in his previous field as a diplomat, the noble Lord obviously had direct experience of the importance and support that the World Service provides. As I have said, these views are important and will be reflected on as we take forward the overall review of the BBC and its funding. I repeat that the BBC World Service provides a valuable service—as I have seen directly in the field through various travels—in a range of languages. Many people rely on the World Service, particularly at times of conflict. In areas such as Ukraine, and in the current conflict in the Middle East, it continues to play a vital role.

Lord Dobbs: My Lords, I welcome my noble friend’s description of how vital the World Service is. In the past the Government have described it as essential, invaluable and playing a vital role, and surely its role could not be more vital given the way the world is turning right now. The Government spend almost £12 billion a year on foreign aid, and the Prime Minister yesterday announced many more billions to be spent on defence. Surely there must be a better way for this vital tool of soft power to be funded than relying on the licence fee, where inevitably it has to compete with the likes of Gary Lineker and Peppa Pig.

Lord Ahmad of Wimbledon: I am glad my noble friend did not ask me who I prefer watching out of Gary Lineker or Peppa Pig; it depends what mood I am in. On the point he raises, the integrated review in 2023 identified that the BBC World Service is vital. As we heard from the noble Lord, Lord Liddle, it is a vital component of soft power and for countering disinformation, and it is important that it is properly funded. The majority of the World Service is funded by the TV licence fee, but we gave that extra uplift of £20 million last year as part of our review and commitment.

Lord Collins of Highbury: My Lords, I hesitate to use the term soft power because, in a previous debate about the World Service, a Minister reminded us that data showed it was the
“top-rated international broadcaster for trustworthiness, reliability and depth of coverage
When Russia invaded Ukraine, the people of Russia turned to the BBC. Two years ago, the Government gave emergency funding of £4.1 million to support that extension of journalism. Why do we have to wait for a further two years? Why are the Government not responding to the urgent need for trustworthy news going to Russia?

Lord Ahmad of Wimbledon: My Lords, I reiterate that I believe it is a vital service. When we use the term soft power, we are talking about different services that the United Kingdom offers to the world and the tools that are available. Of those, the BBC World Service provides exceptional news information. I know that in the case of the Hindi language, the World Service is one of the most effective and listened to channels in India. The noble Lord is right that the Government provided exceptional funding of £4.1 million, and my noble friend alluded earlier to the additional support we have provided to Ukraine in its fight against the illegal war Russia has waged on it. We will continue to see what tools are available to us, and we will work to ensure that the BBC World Service, along with a range of other soft power tools, is utilised effectively. I agree with the noble Lord that it is particularly effective in conflict situations.

Bishop of Leeds: My Lords, I notice that the funding agreement with the FCDO runs only until April 2025, which is not very far ahead. Can the Minister tell us whether the Government are considering, at the very least, taking back full funding of the World Service in the longer term rather than leaving it to the licence fee?

Lord Ahmad of Wimbledon: My Lords, I hear clearly the proposal from the right reverend Prelate, which has also been suggested by the director-general. I accept the premise of his question; that model existed until 2014. It is important that we make full leverage of funding. It is a challenging fiscal environment, but the Government have demonstrably shown that when we need to provide additional funding to the BBC World Service, we do so. The funding review being undertaken by the DCMS provides an opportunity to look specifically at the funding of the World Service.

Lord McNally: My Lords, this Question has a familiar ring to it. On 12 March, the noble and gallant Lord, Lord Stirrup, said the World Service was
“one of the most powerful soft-power tools that this country possesses
He was followed by a range of noble Lords, including the Foreign Secretary, agreeing with him, just as we do this afternoon. The problem is that, as the retiring director has pointed out—I associate myself with the words from the noble Lord, Lord Liddle, on her work—as things are, the World Service will not be able to deliver that soft power unless it is given proper long-term funding. Given the range of agreement across the House, surely there is the opportunity now for the Government to produce a long-term, well-funded financial plan for the World Service that can meet the desires of the country and this House.

Lord Ahmad of Wimbledon: My Lords, the noble Lord will know the deep affection I have for him and his views, to which I listen very carefully. He will accept that the DCMS review, as I said earlier, will be looking at the World Service specifically. Soft power around the world is needed at a time of conflict and need. I alluded earlier to the Gaza conflict. The BBC World Service provides important signposting at times of conflict, such as where to go and where to get  information. That is a vital example of what it does. Of course, I acknowledge the opinions expressed in your Lordships’ House. As I said, the review of the whole BBC funding envelope will look at every element of BBC funding but also specifically at how we protect this valuable asset when it comes to our global power across the world.

Viscount Colville of Culross: My Lords, I declare an interest as a former BBC producer. The Government’s grant in aid to the BBC World Service will now not be decided until some unspecified time after the election. The present grant runs out in March next year. Does the Minister realise the havoc this uncertainty is playing with the BBC’s planning for the future of its world and language services?

Lord Ahmad of Wimbledon: My Lords, for all funding, I accept the principle that we need to provide certainty and continuity. As we move towards an election, it is very clear that, irrespective of any result or outcome of a given election, we have seen successive Governments over many years show their commitment to the BBC and, importantly, to the World Service. Our commitment is that we will stand by the BBC World Service if we continue to be chosen as the Government of the day in the election later this year. I assure noble Lords that the review being undertaken by colleagues in the DCMS is very much focused on providing the very certainty to which the noble Viscount alludes.

Artificial Intelligence (Regulation) Bill [HL]
 - Order of Commitment

Lord Holmes of Richmond: Moved by Lord Holmes of Richmond
That the order of commitment be discharged.

Lord Holmes of Richmond: My Lords, I understand that no amendments have been set down to this Bill and that no noble Lord has indicated a wish to move a manuscript amendment or to speak in Committee. Unless, therefore, any noble Lord objects, I beg to move that order of commitment be discharged.
Motion agreed.

Infected Blood Inquiry
 - Commons Urgent Question

The following Answer to an Urgent Question was given in the House of Commons on Tuesday 23 April.
“Let me start by stating that the stories reported in the recent BBC news article, and indeed the Sunday Times report by Caroline Wheeler, demonstrate the unimaginable suffering of all those impacted by this dreadful scandal. As the House will know, in 2017 the Government established an independent public statutory inquiry chaired by Sir Brian Langstaff, to give those impacted and their families the answers that they deserve.
Since it was established, the inquiry has taken evidence from a range of sources, and the testimonies are indicative of the bravery of every individual who has come forward. The Infected Blood Inquiry’s final report is due to be published within a month, on 20 May, and we expect the inquiry’s findings to cover a set of extremely challenging issues. It would not be right for the Government to pre-empt the findings of this long prepared and carefully considered report, but the Government have committed to update Parliament through an Oral Statement on next steps within 25 sitting days following 20 May. It is our intention to make that Statement as soon as possible. The 25-day stipulation is a deadline, and certainly not a target.
In January this year, I appointed an expert group to provide technical advice to the Cabinet Office in responding to the Infected Blood Inquiry’s recommendations on compensation. That work is well under way and will build on the recommendations of the Infected Blood Inquiry to inform the Government’s substantive response to the inquiry’s recommendations on compensation. The Government understand the need to move quickly to provide compensation to victims of infected blood. Most recently, we tabled amendments just last Wednesday to the Victims and Prisoners Bill to impose a duty on the Government to establish an infected blood compensation scheme. It also establishes a new arm’s-length body, named the infected blood compensation authority, to deliver the compensation scheme. It will operate on a UK-wide basis to ensure parity and consistency. That demonstrates our absolute commitment to deliver long overdue justice to victims of infected blood.
We understand that for many there is an urgent need for compensation. As the House will know, in October 2022, the Government paid more than £400 million in interim compensation to help to ease the short-term needs of those infected. The government amendment also includes a statutory duty to make interim payments of £100,000 to the estates of the deceased infected people who were registering with existing or former support schemes, where previous interim payments have not already been made to infected individuals or their bereaved partners. That is an important step forward to get substantial compensation into the hands of families and victims of infected blood. Should that government amendment be supported in the other place, it will return to this House for debate in the usual process of Commons consideration of Lords amendments.”

Baroness Chapman of Darlington: My Lords, as a result of this scandal, two people die on average each week. It now seems that children, even babies, were experimented on in the 70s and 80s without their parents’ consent. As my right honourable friend Diana Johnson said yesterday:
“These disturbing revelations raise serious criminal and ethical issues for the NHS and the medical profession”.—[Official Report, Commons, 23/4/24; col. 802.]
Last week, the Government laid amendments to the Victims and Prisoners Bill after the Commons forced the Government to act, but we were disappointed to see that the Government are attempting to wriggle  out of the three-month time commitment to introduce a mechanism for compensation payments to be made. My noble friend Lord Ponsonby has tabled an amendment that would reinstate the commitment to act within three months. This will be considered next week. Will the Government accept the amendment?
The Government accept the moral case for compensation, so can the Minister confirm what progress has been made on setting up the basis for a compensation scheme for those infected by contaminated blood and whether the Government will respond to every recommendation in the Infected Blood Inquiry report? How long after publication will the Government publish their full response to the recommendations? What preparatory work is being done by the Treasury on this issue, and will the Minister commit to making this publicly available?
We learned this morning of the sad passing of our loved and respected friend Lord Field of Birkenhead, a steadfast champion for justice on this and many other issues. I can do no better this afternoon than to consider Frank’s words. In his statement to the inquiry, he said:
“I do not know how to value the life of someone lost due to Factor 8, but I know that it is worth more than £20,000.”
He said this with reference to a meeting that he led in 1989. This has gone on for far too long. The time to act, as Frank said, has now long passed.

Earl Howe: My Lords, the story of infected blood is one of unimaginable suffering, inflicted on thousands of individuals and families over decades. It is undoubtedly an unparalleled tragedy in the history of the NHS.
I pay tribute to the late Lord Field for all the work he did in championing the cause of so many people who required justice in one form or another. The Government are determined to deliver justice to the victims as swiftly as we can. The Infected Blood Inquiry’s final report will be published within a month, on 20 May. We will update Parliament through an Oral Statement on next steps as soon as possible thereafter. Meanwhile, as the noble Baroness has said, the Government have tabled amendments to the Victims and Prisoners Bill, which we will debate next week. They are designed to deliver on the Government’s commitment to pay compensation and will set up the legal framework to do that.

Baroness Brinton: My Lords, from the Liberal Democrat Benches we also pay tribute to Lord Field, who campaigned actively for infected blood victims from 1989. As with Lord Cormack, he will be greatly missed by the infected blood community.
Yesterday, Dame Diana Johnson rightly highlighted the appalling experiments which were carried out on an estimated 380 children. In particular, the parents of the children at Lord Mayor Treloar school were not even aware that their children were part of a research study. This was first highlighted by “World in Action” in 1975. Caroline Wheeler and the Sunday Times have campaigned rigorously on this for the last three decades, and to continue to remind people. It appears that the Government need reminding yet again that this is long overdue. I too have laid amendments to the Victims and Prisoners Bill for next week’s debate. The deadline  for the compensation scheme is important, but victims need mandatory provision of support and legal advice. Interim payments are needed for those who have not yet received them: for those who are known about, within three months; for those who may not be confirmed, as soon after as possible.
Finally, we thank the Government for setting up the arrangements for the compensation body, but we hope that a High Court judge and a shadow board will also be appointed within three months.

Earl Howe: As the noble Baroness rightly says, it has been known for many years that many dozens of children with haemophilia at Treloar school in Hampshire were infected with HIV and hepatitis C in the 1980s through contaminated blood products. We are acutely aware of the distress and suffering of those individuals and of the bereaved families of those who have died. We expect Sir Brian Langstaff’s report to reveal the full circumstances of how this appalling tragedy came about.
The Government’s aim is to deliver compensation to those eligible as speedily as possible. Government amendments to the Victims and Prisoners Bill are designed to do this. One particular amendment will set up an arm’s-length body to deliver the compensation scheme, as recommended by Sir Brian. It will provide for interim payments to a particular group who have so far received no compensation, and for early commencement of the ALB and the interim payments. The ALB will be set up straightaway in shadow form, led by an interim chief executive, so that the practical work for delivering compensation can begin as soon as possible.

Viscount Hailsham: My Lords, in noting what my noble friend the Minister said, on the matter of compensation, I am sure he will agree that those who received inflected blood products, or their estates if they are deceased, should receive early compensation. That also applies to dependants who can establish clear financial loss. Beyond that, should we not be a bit cautious about compensation? Otherwise, the bill will be colossal.

Earl Howe: My noble friend is quite right to highlight what is likely to be a very significant impact on the public finances as a result of compensation in this area. It is important that any decisions on compensation funding are taken carefully. I think the House would expect the Government to work through the associated costs to the public sector while considering the needs of members of the community and the very far-reaching impacts this scandal has had on their lives.

Baroness Campbell of Surbiton: My Lords, I am sure the Minister appreciates the deep mistrust the community has regarding this Government. It has, for 40 years, struggled to have its voice heard and its needs met. Bearing this in mind, could he expand on the ways the Government intend to involve the community from here forward in all the developments? As there has frequently been such mistrust, we owe it to the community to involve it at every stage of the way.

Earl Howe: My Lords, I fully recognise the point that the noble Baroness has just made. My right honourable friend the Minister for the Cabinet Office is preparing to engage with members of the infected and affected communities at the beginning of May in a succession of meetings. Further than that, we agree that it is critical for those infected and affected to have a role in the infected blood compensation authority itself. We intend to utilise the provision for committees and sub-committees to make sure that the community is represented on these groups. It is right that the exact committees and board make-up is defined once the shadow body is established, with the input of the infected blood community. The message I would give is that we want to work collaboratively with stakeholders to achieve the right outcome.

Lord Turnberg: My Lords, this has been an unimaginable tragedy, and we must move to compensate those who have been affected by it as quickly and as well as we can. One part of it is worth thinking about, which is trying to ascribe malign intent to those who were involved in giving this product in the hope that it would stop the bleeding and potential death of children. That was the intent in using factor 8 at the time. It had tragic consequences and many mistakes were made, but we must not assume malign intent on the part of the people involved.

Earl Howe: The noble Lord makes a very good point. For me to comment further would be wrong. What we need to do is wait for Sir Brian Langstaff’s final report on 20 May, which should, we expect, reveal some of the underlying facts that the noble Lord alluded to.

Leasehold and Freehold Reform Bill
 - Committee (2nd Day)

Welsh Legislative Consent sought

  
Clause 36: Enfranchisement or extension: new method for calculating price payable

Amendment 23

Baroness Andrews: Moved by Baroness Andrews
23: Clause 36, page 29, line 29, at end insert “and has effect subject to section (LRHUDA 1993: Non-development guarantee)”Member's explanatory statementThis amendment is related to another amendment in the name of Baroness Andrews inserting a new Clause (LRHUDA 1993: Non-development Guarantee).

Baroness Andrews: My Lords, in moving this amendment I shall also speak to Amendment 24. These might seem to be rather arcane amendments; Amendment 23 is a technical amendment and Amendment 24 is the substantial point and a proposed new clause. This might look like an arcane point but it is a very significant one and it is simple to correct. The amendment asks the Government to act on a promise to remove a significant blockage, which at the moment  increases the cost of enfranchisement to leaseholders who are threatened with upward extensions to blocks of flats and have to pay the freeholder extra for the possible profit he might have made had he chosen to develop. The proposed new clause, although detailed— I apologise for the length of my speaking note—would remove the blockage. I am extremely grateful to noble Lords around the Committee for supporting this, and to the Minister, who has already met me. We all agreed that this is something that must be put right in the Bill.
I declare an interest as a leaseholder in a block of flats that has been under threat of an upward extension for not two years but five years. The consequent blight and anxiety have been considerable. Asking for compensation for not extending upward is now an accessible and popular option for freeholders looking for more profit, especially when it falls under the relaxed requirements of permitted development. That means that there would be no automatic planning hearing, and often what would count as a major development slips by for determination simply by planning officers. There is no requirement for affordable housing, friendly accommodation that would help disabled people, or considerations of planning issues such as the impact on structural stability or protection from massive disturbance for residents.
Given that upward extension can be authorised in wider circumstances than the normal planning rule, it is estimated that there are about 2.2 million custom-built private sector leasehold flats in blocks where development value—for example, for upward extension—could be an issue, and therefore where leaseholders might face this additional obstacle to enfranchisement. There are certainly many people already affected by upward development in London alone.
The current key legislation is paragraph (5) of Schedule 6 to the Leasehold Reform, Housing and Urban Development Act 1993. It defines development value in relation to premises to be enfranchised as an
“increase in the value of the freeholder’s interest in the premises which is attributable to the possibility of demolishing, reconstructing, or carrying out substantial works of construction on, the whole or a substantial part of the premises”.
To give a graphic illustration, in our own situation in my block of flats, when faced with a development we were not consulted on and did not want, we sought to enfranchise ourselves. The cost was originally estimated at £750,000 for 103 flats. Now the development value has been added, that has shot up to £1.75 million. We can no longer raise the funds and we cannot buy the freehold. What has shocked me most as I have pursued the Government on this point is that the impact assessment on upward extension of permitted development shows that the Government actually knew that this would happen. They anticipated that upward extensions would generate freeholder profits to the tune of £530 million in land value uplift, even without any actual development. Moreover, the impact statement recognised that this may make it more expensive for leaseholders to enfranchise.
To their credit, the Government realised that there was something wrong, especially since it would contradict the policy intentions of this Bill to make enfranchisement cheaper. So they referred it to the Law Commission, which reported in 2020 on options to make enfranchisement cheaper and easier. In option 9, it said that:
“When exercising enfranchisement rights, and in order to reduce the premium payable where there is development value, leaseholders could be given the ability to elect to take a restriction on future development of the property”.
The Government accepted the option. On 11 January 2021, in the House of Commons, Robert Jenrick promised in a Written Statement:
“Leaseholders will also be able to voluntarily agree to a restriction on future development of their property to avoid paying ‘development value’”.—[Official Report, Commons, 11/1/21; col. 10WS.]
Nothing would give us more pleasure in my block than a promise not to develop.
Even more to their credit, this solution was signposted in the impact statement on this Bill, in Annex 2, at paragraph 12, which recognises that the prospect of paying development value can make enfranchisement “prohibitively expensive”, and contemplates that there will be a new right for an option not to pay development value on the condition that leaseholders guarantee not to develop themselves. So I must ask the Minister this: with all these assurances having been given, where is this new clause? What has happened to the policy commitment?
The Minister knows I have enormous respect for her—she and I have solved many problems outside this House together, and I am sure that we can do so inside the House as well. Perhaps in her response she could explain to me why the impact statement recommends something that the Law Commission did not recommend, and which I find slightly bizarre—that
“the freeholder will be paid reasonable out of pocket expenses that have been genuinely incurred in pursuit of development”.
Why do the Government feel they have to reward the developer again for doing this, when the Secretary of State in another place is all for squeezing freeholder revenue streams, not finding new ones?
This is about helping the Government. The proposed new clause would speed up the process of decision— I am doing the Government’s job for them. To cut through the legal language necessary in the proposed new clause, let me explain briefly how it would work, and how Amendments 23 and 24 relate to Schedule 5.
Amendment 23 makes a link between the non-development guarantee and Schedule 5. Paragraphs 2(2) and (4) of Schedule 5 restate the existing law in the 1993 Act and define development value in relation to the premises to be enfranchised as any increase in the value of the freeholder’s interest in the premises
“attributable to the possibility of demolishing, reconstructing or carrying out substantial works of construction on, the whole or a substantial part of the premises”.
Subsection (1) is the key provision of the proposed new clause. It covers the point that leaseholders can obtain
“a reduction in the price payable for collective enfranchisement in relation to any premises”
if the nominee purchaser—the leaseholder, or the leaseholder’s representative—guarantees not to pursue development. This is achieved by way of a non-development guarantee, or NDG, to be proposed when the necessary notice under Section 13 of the 1993 Act  is given. The guarantee specifies that the nominee purchaser, if they acquire the freehold, promises not to carry out or allow others to carry out similar development works.
In proposed new subsection (2) we have provided that, in making this calculation, exact terms will be followed: works of
“demolition, reconstruction or substantial work of construction”
which correspond to those specified in the guarantee in subsection (1) must be disregarded. There can be no doubt about what sort of development we are talking about.
We also recognise the need for flexibility. The law recognises that enfranchisement can be a process of negotiation about price and terms, and that the price may have changed by the end of the process. The amendment takes care of that. Proposed new subsection (3) recognises that the NDG, incorporated in a final negotiation, may indeed differ, but requires that the terms must be “set out expressly” in the final documentation.
We have also solved the problem of how to make the guarantee legally effective—there is no end to the help we are giving the Government. Even if the freehold changes hands, by using the Local Land Charges Act 1975, under proposed new subsection (4) an NDG is registerable as a local land charge and is enforceable by injunction by the immediately former freeholder. This follows the model of Section 106 planning agreements, which are enforceable by injunction by the local authority under Section 106(5) of the Town and Country Planning Act 1990. It avoids the problem recognised by the Law Commission of formulating the restriction as a covenant between incoming and outgoing freeholders.
Finally, there is the question of how long the guarantee should last. The impact assessment is silent on this, but the Law Commission, at paragraph 6.167 of its report, says that a time limit should possibly be imposed, and that in any event it is not necessarily the case that the restriction on development should last for the life- time of the lease. It suggested 10 or 20 years, but the measure in the impact assessment is silent on this. However, given the constant changes in planning law, we follow the advice of the Law Commission.
Subsection (6) adopts a 10-year lifetime for the non- development guarantee from the date of enfranchisement, after which it would be removed from the local land charges register. In subsection (8) we also provide specifically that a registered NDG may be varied with the consent of both the current and former freeholder. I pay tribute to David Boardman, who has given us expert advice on this.
The amendment covers all the necessary points. There is much more that I could add in context, but the Committee will be relieved to know I am not going to do that. The Minister may well tell me how to improve the clause and I would be very pleased if she could do that, but I hope she will not find fault in my seeking to help her to put in place simply what the Government said they wanted. I remind her that the decision was based on legal advice that they themselves commissioned, it was announced by the Minister in another place and it was contemplated in the Bill’s own impact assessment. All that is missing is the  actual new clause that would have delivered it, which I have now provided and which I look forward to the Minister accepting. I beg to move.

Lord Best: My Lords, I support Amendments 23 and 24 in the name of the noble Baroness, Lady Andrews. I can imagine the anguish that must be felt by leaseholders in blocks of flats who are facing the disruption of one or even two new storeys being built on the roof of their flats. With freeholders now having permitted development rights for upward extensions, residents face the disruption, noise and hassle of builders, lorries, cranes, skips, scaffolding and so on for months—and now they face the prospect of being unable to buy the freehold of the block because development, or the possibility of upward development, adds to the value of the block and can make enfranchisement prohibitively expensive. The extra value of adding new storeys, or the compensation demanded for not developing where there is potential to add them, generates additional freeholder profits but makes enfranchisement unaffordable, yet the Leasehold and Freehold Reform Bill is all about giving leaseholders a better deal and easier access to enfranchisement.
I note that the previous Secretary of State promised to fix this specific problem through a clause in the Bill enabling leaseholders in a block to agree together that no upward extension should take place. In this way, they remove the extra value for the freeholder. It seems that in the drafting of the Bill the promised new clause, originally an option proposed by the Law Commission, has got lost. So, on behalf of the 2 million-plus lease- holders who could be affected, I strongly support the amendments from the noble Baroness, Lady Andrews, which would fulfil the Government’s earlier promise.

Baroness Thornhill: My Lords, I suppose I could say “#UsToo”. I support these amendments, which are simple in purpose, in the name of the noble Baroness, Lady Andrews, who summed them up thoroughly, clearly and personally. As things stand under PDR, a freeholder can add two storeys to their existing building as a matter of right, with no planning permission needed: as I look round Watford, I can see evidence of that with my own eyes. But I also know that that can have very serious consequences. As well as the inconvenience of the building work going on for as long as it takes, you also discover that the top-floor flat that you paid a premium for is now worth less as you are a middle-floor flat. Then there is the pressure on communal space and amenities, including the dreaded bin store and the state thereof.
Adding two more storeys to a presumably well-planned block of flats, for a set number of residents, is not consequence-free. But the consequences are absolutely trivial compared with the knock-on effects of such development on the Government’s own stated aim, which is to encourage more leaseholders to buy their freehold. This is an additional and often insurmountable obstacle. It significantly raises the cost of enfranchisement, as has been said. The value of the block will have gone up. The leaseholders are now required to pay more for their freehold. In many parts of the country, this takes it way out of reach, as in the noble Baroness’s case.
The noble Baroness, Lady Andrews, very thoroughly cited a positive trail of support: all the right noises from the Secretary of State in 2021, the Government’s complete recognition of the dilemma and a real promise of the ability to look into some restriction.
It is clear that there is a policy conflict here: the need for more homes, which we all agree on, versus the enfranchisement of leaseholders. As things stand, the homes policy is top trumps. Can the Minister advise on whether there will be a review of PDRs in general, including focusing on unintended consequences such as this and whether there is a way to sort this out in the leaseholder’s favour in the Bill? At the moment, it feels as if the freeholders are still very much holding all the aces and current residents have no voice at all in this significant change to their environment and, possibly, their life chances and finances.

Baroness Taylor of Stevenage: My Lords, I am very grateful to my noble friend Lady Andrews for the collaborative way in which she has prepared and worked on her amendment, and drawn the attention of the House to what seems to be an omission from the Bill. We believe this needs to be rectified and my noble friend has not only set out, with her usual thorough approach and eloquence, exactly what the issue is, but has also proposed a straightforward and elegant solution, which we support.
My noble friend describes the Law Commission report as adopted by the Government in January 2021. Indeed, the government press release of January 2021 indicated that the Bill would strongly take account of this government commitment to release leaseholders from the straitjacket of hope of future development value. I quote from that press release:
“Leaseholders will also be able to voluntarily agree to a restriction on future development of their property to avoid paying ‘development value’”.
This is based on a Law Commission suggestion, which clearly indicates the direction of travel and which we believe the Government have accepted. To quote from the Law Commission recommendation:
“Premiums would be reduced at the date of the freehold acquisition claim. If leaseholders subsequently decided that they wanted to develop, they would pay a portion of any profit received on a subsequent development to the landlord, rather than (as at present) having to pay development value in respect of a speculative future possibility of development”.
The Law Commission also set out clearly the principle that leaseholders should not need to have to negotiate on a piecemeal basis for this restriction but should be granted it by right. The commission refers to leaseholders of flats acquiring the freehold to their block and states that,
“as they would not be required to pay the landlord an additional sum to reflect the potential to develop their properties, leaseholders would no longer be required to negotiate with the landlord to create such a restriction; rather, they would be entitled to demand such a restriction be included”
and
“disputes, negotiation and litigation about development value would be reduced”.
The Law Commission clearly believed that the election to take a restriction on development outweighed the disadvantages put forward by other consultees and that such an election was eminently possible to implement where there was agreement among leaseholders.
I also point out that this issue arises, in part, from yet another unintended consequence of the permitted development regime—a point mentioned by the noble Baroness, Lady Thornhill—on which I have made my views clear in your Lordships’ House in the past. I am not an unequivocal fan of PD. Permitted development removes the step of local accountability through the planning system, often the contribution to local community infrastructure and almost always the contribution to local affordable housing which would be required through traditional planning applications.
At its worst, permitted development drives a coach and horses through local plans, resulting in residential property in inappropriate areas and buildings, and in taking buildings out of commercial use where it may not be appropriate to do so. In the case of the subject of this amendment, its very existence can create an added financial pressure on those wishing to exercise their enfranchisement rights. That is another reason why we believe that the solution proposed by my noble friend Lady Andrews delivers an equal and justifiable right to leaseholders.
We strongly support my noble friend’s amendment. As the noble Lord, Lord Best, has said, 2 million leaseholders may be affected. We support it on their behalf and not least because it meets the overall aim of the reform to leasehold as stated by the Government and in the Bill: that it should reduce enfranchisement premiums while maintaining sufficient compensation for landlords. It also sets out a clear and practical route map for the implementation of such a scheme. We look forward to hearing from the Minister about how she might make the necessary progress on this issue.

Baroness Scott of Bybrook: My Lords, I thank the noble Baroness, Lady Andrews, for her Amendments 23 and 24 on development value. I also thank her very much for meeting me on this subject.
The amendments would introduce a scheme where enfranchising leaseholders would not pay development value if they guaranteed that they would not develop for a period of 10 years. Under the current law, lease- holders are sometimes required to pay development value when collectively enfranchising a block of flats. This is the value of the potential future development of the property, such as through adding another storey to the building, as we have heard. We recognise that development value can make the cost of enfranchisement prohibitively high.
We are committed to bringing forward a workable scheme and are exploring this area further. It is, as we have found, however, an area fraught with loopholes and technical detail. To be honest, it will take us time to get this right.
Before I finish, I want to bring up permitted development, because all noble Lords have brought this up. As noble Lords probably know, the Government have recently consulted on making changes to various permitted development rights. The consultation ran for eight weeks from 13 February to 9 April. We are considering the responses and I am sure we will have a debate on those in this House in due course.
The noble Baroness, Lady Andrews, is right about this issue. We know about it and we support her, but it is difficult. I would like to meet her again, and anybody else who would like to come, to go through her amendments in detail and take things forward in that way.

Baroness Pinnock: Could the Minister tell the Committee whether the problem that the noble Baroness, Lady Andrews, has defined could be resolved by removing permitted development rights altogether on these blocks of flats? This goes back to what was the case. If any development was proposed, it had to go through the normal application to the local planning authority.

Baroness Scott of Bybrook: I do not think that would be a sensible solution, because there might be times when permitted development might be the correct thing to do and everybody might be happy about it, including those leaseholders who have enfranchised. We need to take this steadily because it is fraught with complexity.

Baroness Andrews: I am extremely grateful to everyone who has supported the amendment, especially the noble Baroness on my Front Bench. I am also particularly grateful to the Minister. I understood her to say that the Government are committed to bringing forward a workable scheme to deal with this problem, which is exactly what I wanted to hear. I know it must be fraught with difficulties. There are lots of rights and planning issues involved. There is a whole nest of issues that would have to be addressed. The important thing is that it be in line with the timetable for the Bill. Perhaps she will be able to say more about this when we meet, but I hope that it will be either aligned in the timetable, so that there is no more confusion and we can get this tracked as soon as possible, or, if it requires legislation, in the Bill. I take the point, and I would be very happy to meet her—and to take in with me an army, and its advisers.
I have one further reflection on the PDR review. I did my homework—I did what the Minister said, and I saw whether I could use the current PDR review as a way of raising this, but it does not allow me to do that; it is too narrow in scope. Therefore, in fact we need a proper review of PDR, because the implications are so varied and wide. If the Government could commit to that, there would be a lot of political capital in it. In the meantime, I am happy to leave this amendment, and we will see and wait on progress.
Amendment 23 withdrawn.
Clause 36 agreed.
Amendment 24 not moved.

  
Schedule 4: Determining and sharing the market value

Amendment 25

Baroness Scott of Bybrook: Moved by Baroness Scott of Bybrook
25: Schedule 4, page 157, line 35, at end insert—“(1A) If section 3(3) of the LRA 1967 applies to the current lease (successive leases treated as a single lease),  sub-paragraph (1) is to apply only if the one of those leases which is in effect at the valuation date is a market rack rent lease.”Member's explanatory statementThis modifies the application of paragraph 8 where successive leases are “chained” to constitute a long lease under the LRA 1967.
Amendment 25 agreed.

Amendment 26

Lord Howard of Rising: Moved by Lord Howard of Rising
26: Schedule 4, page 160, line 27, at end insert “, but see sub-paragraph (3A).”

Lord Howard of Rising: I speak to Amendments 26 and 27 in my name, focusing on the measures in this Bill relating to marriage value which, as it stands, would allow leaseholders with leases of 80 years or fewer to acquire freeholder rights without paying a fair share of the marriage value to the existing freeholder.
Marriage value, in relation to leasehold enfranchisement, is set out in the Leasehold Reform, Housing and Urban Development Act 1993, and defined as the financial benefit that results from merging the freeholders’ and leaseholders’ interests in a residential property. Under the 1993 Act, and reaffirmed in the Commonhold and Leasehold Reform Act 2002, 50% of the marriage value is payable by the leaseholder to the freeholder when the unexpired term of an existing lease is under 80 years.
Handing over the full benefit of marriage value to leaseholders without due compensation will have wide-ranging effects, but the most damaging and significant is the threat to property rights. Our economy is built on property rights. If the ownership of property is no longer secure, because it can be taken away without compensation, where does that leave us? If the Bill goes through unamended, it will set a dangerous precedent for Governments to transfer wealth arbitrarily. What we are looking at today could be the thin end of the wedge. I am not suggesting that government actions would escalate immediately, but any power given to government will be used to its full extent sooner or later, however benign the original intention. Do not forget that income tax started out as a temporary measure at 2.5p in the pound, and has reached as high as 100%
On top of the principled concerns that I have set out, there are a number of practical ones. The assets set to be transferred as a result of these measures have a value of £7.1 billion, and it is likely that some of that value is being used as security for loans. Do His Majesty’s Government know how much of the affected property is tied up in this way, and do they know how the banking regulatory authority feels about, what would become, unsecured loans, or the possible consequent impact on banks’ capital requirements?
The Government’s impact assessment states there are 4.8 million leasehold properties in England, of which only 385,400 have leases under 80 years. Of those 385,400 leases, the bulk of the value is located in London and the south-east. Despite the Government’s noble ambition to support aspirational home owners,  I understand that in London, 60% of leaseholders benefiting from this change in policy would be private investors, of which 10% to 25% are based overseas. At the same time, many of the freeholders whose assets would be removed are charities or pension funds which have invested to cover their long-term liabilities.
There is also a significant impact on the Exchequer. Under the status quo, any financial gain made by freeholders when leases are sold is taxable. If all the financial gain is given to the leaseholder, a good proportion of the tax that would have been due will be sheltered by the exemption of disposal of a principal private residence. The loss to the Exchequer under this consequence alone has been calculated at £l billion.
Finally, there is the problem with human rights legislation. One of the founding principles of the European Convention on Human Rights is the protection of property. The lack of compensation for freeholders under the processes set out in the Bill challenges the expectation that parties should be fairly compensated for losses resulting from expropriation or state control of use. Whatever government lawyers say, there is bound to be a difference of opinion. In fact, the Government’s own legal advice described it as “finely balanced”. Do your Lordships imagine for a moment that this arbitrary transfer of property without proper compensation being paid will not be fought through the courts to the highest level? It will cost the Government a small fortune and freeze the market in leasehold properties, as present leaseholders will be reluctant to sell while there is a chance of greater value in the future.
My amendments are simple. They preserve the existing arrangements only for leases with an unexpired term under 80 years, leaving the 95% of leaseholders who have leases of more than 80 years to benefit from the Government’s proposals, even when their term drops below 80 years. This is a fair balance. I hope my noble friend the Minister will consider my amendments carefully and from a point of principle. I would welcome further discussions to fine-tune the details so that we can ensure that this policy works for everyone. I beg to move.

Baroness Deech: My Lords, I am pleased to lend my support to the noble Lord, Lord Howard, and have put my name to these amendments. I have three short points to make. One is that phasing out in this area must be right. The second is that we should treat retrospective legislation very suspiciously. Thirdly, it cannot be right to deprive people of their property without compensation.
Noble Lords might ask what I know about this. I taught property law for many years and, although I have forgotten much of the detail, I can assure your Lordships that this area of law goes back to the Middle Ages—in fact, it probably goes back 1,000 years. It is by no means simple to reform it, although I understand that the Government’s intentions towards leaseholders are good ones and that one day leasehold will be phased out. But the law is so complex that this cannot be done quickly or unfairly. The Law Commission has written thousands of pages on this area; it is far from a simple matter. Indeed, to replace the leasehold system might take decades, if not longer.
The main argument against the Government’s proposals is wrapped up in the European Convention on Human Rights’ Article 1 of Protocol 1, which says that all persons have the right to own property and to make use of their possessions, and that no one shall be deprived of his property until public necessity so demands; if so, the state must guarantee fair compensation. This does not seem to be the case in the Bill.
Our own UK Human Rights Act says:
“Every natural or legal person is entitled to the peaceful enjoyment of his possessions. No one shall be deprived of his possessions except in the public interest and subject to the conditions provided for by law and by the general principles of international law”.
If we do not accept the amendments in my name and that of the noble Lord, Lord Howard, this law stands a very strong chance of being attacked under human rights law, because it is not offering fair compensation to the freeholders, and it is retrospective. I therefore very much hope that the Minister will see the dangers and unfairness in this, and accept the proposals in these amendments.

Lord Moylan: My Lords, it is a privilege to speak after the noble Baroness, with her depth of knowledge about this subject, and my noble friend Lord Howard of Rising, who did me a number of favours. First, he saved me from any obligation to explain the meaning of marriage value. Secondly, he made a moderate and temperate case for his amendment when my argument might be expressed in a somewhat less moderate and well-tempered manner, because I feel a real sense of outrage about what is being proposed.
As my noble friend has explained, marriage value is a real financial asset. His Majesty’s Government say that they are abolishing it. They are not abolishing it; they are, in effect, transferring, at the stroke of a pen, value from the freeholder to the leaseholder without any compensation. It is, simply, expropriation. My amendment, which is a probing amendment—I would not expect it to be part of the Bill—obliges the Secretary of State to pay compensation to those who have lost out as a result. Of course, I really want the Government to scrap the provision itself, rather than for compensation to be paid, and I would not expect my amendment to be a practical policy. It is a probing amendment to raise the question about expropriation without compensation.
I want to make three broad points. There are genuine evils in the leasehold system. I made it clear at Second Reading that there were things that I support in the Bill. For example, it was scandalous that in recent years some housebuilders sold leasehold houses with rapidly escalating ground rents, which they then securitised in order to increase their capital receipts. Also, it is scandalous the way that many freeholders are implementing their obligations in relation to the cladding crisis; people are genuinely suffering as a result.
However, how many of these evils are actually being addressed by removing marriage value from the calculation of the enfranchisement premium, or the premium paid for extending a lease? It is not germane to the main evils that the Bill has been advanced as addressing.
Expropriation of this character implies some wrongdoing on the part of the person whose assets are being expropriated. It requires a high test. Noble  Lords will have noticed that even in the case of the friends of Putin, we have been sensitive and careful about expropriation. We have frozen assets, but when it comes to whether we should expropriate them and give them to Ukraine or do whatever useful stuff we might do with that money, we all draw back from it because of the legal consequences. Here, we are perfectly happy to expropriate assets and hand them around the market without any consideration, and with very few people rising to protest about it, even in your Lordships’ House.
I believe that the Secretary of State said that he sees this as an act of justice, but what justice is involved in transferring wealth from a group of people who include, as my noble friend has said, charities and pension funds to leaseholders, who in many cases are frightfully rich? We will shortly come to amendments in the name of the right reverend Prelate the Bishop of Manchester which deal specifically with charities, which I have put my name to. I live in Kensington, and as I declared at Second Reading, I live in a flat on a long leasehold. However, there are many people around Kensington with very expensive properties who are salivating at the prospect of this going through. This is not substantially helping the poor and middle classes; it is going to transfer huge amounts of wealth to people with long leases. The more valuable the flat, the bigger the benefit that they are going to get from it. Where is the justice in all this? I simply do not understand how that point can be made.
My second point relates to the European Convention on Human Rights, on which I do not claim to be an expert. I have a suspicion that my noble friend, when she rises to answer, will say that in respect of Article 1 of the first protocol—to which the noble Baroness, Lady Deech, has referred with such learning—similar cases in the past have been taken to the court, and that the landowners, the freeholders, have lost. Therefore, the Government are certain that this will pass that test. I am, of course, wholly unqualified to comment on the legal merits of the case in either way. However, even if it did pass that test, is this something that should pass the test in England, as far as the older rights that we have inherited are concerned? This is principally England that we are talking about, with its tradition of respect for private property and not implementing retrospective law or seizure of assets without very good reason. I would suggest that it does not pass the test. Even the Law Society—the “leftie lawyers”, as they are often referred to, which is not a phrase that I would use, and I hope Hansard will put that in quotation marks—is concerned about the damage that this will do to the reputation of English law.
My final point is addressed to my fellows on these Benches, who take the Conservative Whip. Are we and our noble friends on the Front Bench here to expropriate property without compensation, without justice, without an argument, or without there being serious wrongdoing on the part of the person whose assets are seized? Is this what we came into this House to do? I do not think it is. This is something that the Government need to take away and rethink very seriously, because it is wrong, it smells, and it is something that we should have nothing to do with.

Lord Truscott: My Lords, I declare an interest as a long-standing leaseholder, as I have done before. I support the expressed view of His Majesty’s Government on abolishing marriage values—I take a somewhat different view from that of the noble Lord, Lord Moylan—so making lease extensions cheaper and easier. I therefore oppose all the amendments in the names of the noble Lord, Lord Howard of Rising, the noble Baroness, Lady Deech, and others, the subsequent amendment in the names of the right reverend Prelate the Bishop of Manchester and the noble Lord, Lord Moylan, plus the amendment from the noble Lord, Lord Borwick, which we will come to later.
All these amendments impact on the issue of marriage value. I know that your Lordships’ House debated marriage value to some extent at Second Reading, but it is clear to me that reform is long overdue. I will not repeat the discussion that we had at Second Reading about the definition of marriage value. I must tell your Lordships’ House that, as a long-standing leaseholder, I have extended the lease of two properties in two different apartment blocks. I do not know how many noble Lords have gone through the process, but it is quite something to go through.
The current process is a farce—a piece of theatre designed to enrich everyone but the leaseholder, who pays all the costs. First, the freeholder comes up with an imagined figure of the future value of a property which bears no resemblance whatever to market reality. Basically, think of a figure and double it, and that is what your freeholder comes up with. The hapless leaseholder then employs a valuer and solicitor, and so does the freeholder, and the negotiation dance begins. The leaseholder ends up paying much less than the original premium—the original figure—but an awful lot of money in fees.
For the leaseholder, the whole process is uncertain, expensive and stressful. For the freeholder and associated professionals, it is lucrative, and their bread and butter. The current lease extension process is designed to protect the freeholder’s long-term interests at the expense of the leaseholder. It is nothing to do with transferring wealth—we keep hearing this figure of £7 billion being transferred—and everything to do with retaining it, as understandable as that may be.
Several of London’s great estates have maintained their property empires over hundreds of years by exploiting the system and making leasehold extension, or enfranchisement, extremely difficult, opaque and tedious. Leaseholders’ insecurity and uncertainty provide freeholder security. The more freeholders keep control of leases, and discourage extensions, the more they can protect their accrued wealth, and that is really what the debate is about today.
I do not intend to repeat what I said a couple of days ago in your Lordships’ House about the Church of England’s feudal property empire, and the work that it does with charities, except to say that it is a multi-billion-pound business, and, like all businesses, the Church will fight to protect its interests as one of the country’s leading landowners. Abolishing marriage value could, of course, affect all that.
I do not accept all the doom-laden warnings that we have heard from, for example, the noble Lord, Lord Howard of Rising. We have heard such dire  warnings before about the impact this could have. We heard the same from the pension funds—remember that they were saying that the abolition of ground rent would cost them tens of billions of pounds. Well, just today, the Society of Pension Professionals and its chair have said that this is exaggerated and overplayed. In fact, the scale, relative to total assets, is probably not that significant in the long run. I think we will find the same when it comes to marriage value.
I know that a lot of people, including the noble Baroness, Lady Deech, who is very experienced legally in these matters, mentioned the European Convention on Human Rights. A number of major estates and property owners are citing that. I had a hedge fund lobby me, saying that their human rights would be breached under the ECHR were marriage value to be abolished. I do not think the great British public will be awfully sympathetic about hedge funds’ human rights being breached because some people want to reform leasehold and marriage value. In fact, I heard today from noble Lords, including the noble Lord, Lord Moylan, a wonderful case for an opt-out from the ECHR. If billionaires and hedge funds are going to hide behind the ECHR to prevent reform, I think it is a good idea to opt out—maybe some of the noble Lord’s colleagues in GB News would support that as a proposal.
Some say that there will just be a transfer of wealth from one group of rich people to another. There is obviously a certain amount of truth in that—the properties owned by people in central London, whether they are local or foreigners, are expensive—but if you abolish marriage value you will make the housing market more transparent and bring many more properties on to the market, thereby providing more homes. The problem with short-lease properties—I have found this myself—is that they are often unsaleable and un-mortgageable. That means that they can be purchased only by cash. Often, they remain short-lease properties because, as I have already described, extending the lease is a complicated process, lacks transparency and is prohibitively expensive, so they clog up the market. There are an awful lot of short-lease properties, which could be opened up to the market as a whole.
That situation may suit freeholders, who see an early return of their asset when they get a shorthold property back into their hands, but it is bad for the housing market as a whole. It would be better if short-lease properties—there are about half a million of them—were smoothly converted to long-lease properties relatively cheaply, transparently and efficiently. That would benefit the whole economy, not just large freeholders. Getting rid of short leases—and making extensions cheaper and easier, which is the Government’s intention—was one of the key points of the entire Bill, and freeholders should not be able to frustrate it.
On the deferment rate designed to replace marriage value, I fear that it can become marriage value by another name, so, in a way, I understand the point the noble Lord, Lord Moylan, made. Marriage value, as such, is not being entirely abolished as a concept; it is being replaced by the deferment rate. I agree with Amendment 42 in the name of the noble Baroness, Lady Taylor of Stevenage, which states:
“In setting the deferment rate the Secretary of State must have regard to the desirability of encouraging leaseholders to acquire their freehold at the lowest possible cost”.
Otherwise, there is a danger that, in replacing marriage value with the deferment rate, His Majesty’s Government will make extending leases even more costly than at present. I hope the Minister can put my mind at ease on that score.
Amendment 41 in the name of the noble Lord, Lord Borwick, which would give a fixed formula based on the bank rate, appears attractive at first sight, except that no one can possibly know where the rank rate will be in the future. It looks too high at the moment, and the bank rate plus 5% looks overly generous. If the noble Lord can later advise the Committee on where investors can currently achieve certain returns of over 10%, I would be very grateful.

Baroness Fox of Buckley: My Lords, the noble Lord, Lord Truscott, explained very well what I would have liked to say, so “hear, hear” to that. I was beginning to worry that the debate might be getting a bit dull—until the noble Lord, Lord Moylan, spoke. He so infuriated me that I feel I have to say something. I am not able to stay for the rest of the evening, but I wanted to clarify a number of things.
It is true that there are some people who own lease- hold flats who are not poverty stricken, but the characterisation of the 5 million leaseholders in this country as wealthy is ludicrous. The main reason why people—certainly me—are forced to buy leasehold flats is that they are cheaper than non-leasehold flats. As I will indicate in an amendment to be discussed on the next day in Committee, very few of us were originally aware of what a leasehold meant. We thought that we were entering into the housing market and buying a house, having saved up very hard to do so, without realising that we were, in effect, pseudo-tenants with very few rights. That has all been discussed often in this House.
The other thing that I wanted to clarify—I hinted at it, and it will come up again—is the notion that any charity that is a freeholder is doing good in the world; that strikes me as at least open to question. Many of the problems that leaseholders face are due to their being local authority—local authorities are not charities, but there are real problems with local authority flats. Also, housing association leaseholders have endured incredible problems with how the leasehold is set up. It is not appropriate to assume that, because charities say that they are doing charitable work, they are not accountable for some of the uncharitable consequences of the fact that they are, in effect, freeholders making a huge amount of money out of leaseholders.
In that sense, what really wound me up was the idea of this being a limitless expropriation scheme. Leaseholders have felt for some time that they are on the receiving end of a limitless expropriation scheme. The reason why this Bill is here and why people across the political parties, from right to left and in between, are so committed to tackling leasehold is that the inequity is in that capacity to expropriate, via the service charge, ground rent and so on. It means that leaseholders feel there is no way to defend themselves against a freeholder who can just take, take, take. Having paid quite a lot in service charges, I know that you do not necessarily get  a service and there is not very much you can do about it, which is what the Bill is trying to address. I am pleased that the Government are addressing this, although they are not going far enough.
This is whipping up a climate of fear, and the notion that mad socialists are going around stealing property from freeholders is absolutely mythical. It is very important that we do not allow myths to emerge in the midst of this discussion, and that we have a proportionate sense of how to respond. I do not think that all freeholders are evil, but the system is iniquitous. I mentioned before that it has taken a few years of me being here to hear so much enthusiasm for feudalism, but it seems to be coming up again. It might make it difficult to untangle the law—as the noble Baroness, Lady Deech, explained, this goes back many hundreds of years—and I am not trying to be glib, but there have been a lot of commissions looking into this. However, it is not appropriate to sing the virtues of feudalism, either. Feudal property rights are not in the interest of modern democrats, whether they are on the left or the right. The idea that this is the equivalent of the difficulties of expropriating from Putin does not make any sense.
As to the European Court of Human Rights: the irony of the position of Conservative Peers! By the way, I am one of the people who would leave the ECHR— I know everyone here will hiss and boo when I say that —because I do not think it should determine the decisions we make in this or the other House. But Conservative Peers, who would otherwise say that the European Court of Human Rights is unreliable, defending it for hedge fund managers is ludicrous. Freeholders are not necessarily virtuous, benevolent, benign landowners; some are, but most are money-making rentiers. It is actually a criticism of the failures of capitalism that the only way anyone thinks they can make money is by ripping off leaseholders—and then describing them as rich, just because they have got a decent flat. Noble Lords get the gist.

Lord Sentamu: My Lords, I remind the noble Baroness, in light of what she has just said, that it was in this place in 1215 that the barons said to the King, “This is the Magna Carta”. This principle was established and made very clear that a person’s property could not be seized by the King, except by the lawful judgment of his Peers over the law of the land. The assumption is that if you take the property, compensation must follow, even if you are taking such property because you want to convert some or all of it into leaseholds, so that they too can become owners. The Magna Carta will tell you, “Have you forgotten your history? Have you forgotten your law?” The rule of law in this country is what gives us liberty. It is not just a question of the European Court of Human Rights; it is also Magna Carta, which is really the foundation of all these things. To seize somebody’s property, even by an Act of Parliament, would go against the whole reason why Magna Carta came out and gave us the rule of law, in the end.
Let us be very careful in this Bill. If you take away somebody’s property without compensating them, those barons from 1215 will be rising up and saying, “Remember your history, remember your law, remember the tradition that it has created, and safeguard it”.
I do not think that freeholders are simply wanting to hold on to things, in the way that the noble Baroness described some of them, or are not doing any good charitable thing. I live in Berwick in Northumberland, and the duke there has plenty of other things. I have also seen some of the charity work that is being done.
Let us not use language and words because we are enthusiastic in one direction or another and ignore the Magna Carta. It is what has given freedom and liberty even to newcomers such as me. My friends, the rule of law cannot ever simply be brushed aside because of a desire to correct a particular question. The rule of law matters. The Magna Carta matters.

Lord Thurlow: My Lords, I support each of the three amendments in this group. I was going to say that the amendment from the noble Lord, Lord Moylan, concerning compensation, was so articulate that it really needed no reinforcement, but I was not expecting the fine history lesson just now, which has reinforced it with great skill and humour. The noble Baroness, Lady Deech, explained that she taught property law for many years. I studied property law for many years, and I am sure that, if I had studied under her—which would of course not have been appropriate at all in age terms—it would not have taken me so many years.
The expropriation is bad enough, but to add the retrospective characteristic in this legislation is shameful. My principal interest in contributing is the 80-year rule referred to by the noble Lord, Lord Howard of Rising, because that is a very sensible, intelligent compromise to the sledgehammer of absolute abolition of marriage value and hope value in the calculation being entirely reserved to the lessees. Many of the highest-value elements of this paragraph are, indeed, in central London and the south-east, and many are non-resident.
This clause would save the Treasury billions, in addition to earning it some billions, which we heard referred to by the noble Lord. There is logic to the 80 years proposed in his clause. That is the threshold below which mortgagees such as banks and building societies are very reluctant to lend on property. Lessees therefore have no choice but to negotiate an extension if they want to use borrowed money—and, of course, nearly all do. The 80-year rule is a compromise between the very long leases and those moving into the unmortgageable zone. It makes a great deal of sense to cut the pack in this way because it excludes those freeholders of over 80 years but encapsulates the value of the expiring leases. It should be supported.

Earl of Lytton: My Lords, like the noble Baroness, Lady Deech, I come to this from a professional viewpoint. I am a chartered surveyor and, until recently, I was a registered valuer with my professional body. Coming from my background, I see the balance to be struck. When I was in the public sector, I was dealing with matters of compulsory purchase and compensation. Later on, after the passing of the Leasehold Reform, Housing and Urban Development Act 1993, I became the first chairman of the Leasehold Advisory Service. Although I was not a practitioner in the matter of leasehold enfranchisement, I had a very close up and personal involvement with what was happening there.
As we have heard from the noble Lord, Lord Howard of Rising, marriage value exists. It is not a fiction. It is there in legislation and referred to. It is one of the things that is supposed to be taken into account, for instance when dealing with a compulsory purchase case or something like that. I do not make any particular claim for one or other camp; I make a claim for order and rationality in what is happening here. My fear is that if the Bill creates a disorderly process, it will be highly undesirable for everybody concerned—for the public interest, for the people who lose assets and also, incidentally, for leaseholders. With the interconnected way in which property and finance function, I do not think you can simply fillet out all the bits you want for the leaseholder. There would be an imbalance.
We heard from the noble Baroness, Lady Deech, about the ECHR and the principle of fair compensation where assets are necessarily taken away by the order of the state, whether taken directly for the purposes of the state or removed in some other way. That is based on the principle of fair compensation, as defined by reference to the term “market value”. Noble Lords may wish to refer to paragraph 4 of Schedule 4 to the Bill, which refers to market value. I shall return to this theme, because it is very likely that later I shall have amendments of my own to clarify this.
It is worth reiterating what market value means. First, it is part of an international valuation standard—it is not just UK. It is brokered by the Royal Institution of Chartered Surveyors and a body called the International Valuation Standards Council. Market value is:
“The estimated amount for which an asset or liability should exchange on the valuation date between a willing buyer and a willing seller in an arm’s length transaction after proper marketing and where the parties had each acted knowledgeably, prudently and without compulsion”.
My difficulty—I think it is probably germane to what is happening here, because bits of this Bill interleave with other bits at earlier and later stages—is that the definition of market value for the purposes of Schedule 4 is something rather different. It does not identify a willing buyer and a willing seller, just a willing seller. I will come back to this matter at a later stage.
I am sure that the noble Lord, Lord Thurlow, has dealt with commercial rent review, as I did for many years when I operated out of the West End. Anybody who has done so will know that the question of each party being described as “willing” is significant to the outcome of the assumed deal that has to be brokered—ultimately, if not by agreement, by an arbitrator or an independent expert dealing with the valuation. Typically, this will be for a rent review or a rent under a new lease where the commercial lease is entitled to a process of renewal.
It is very important that we understand that that failure to have a willing seller and a willing purchaser implicitly results in a skewing of the outcome; in other words, it can be argued that the only willing party to this is the seller—in theory, at whatever figure might be offered by the person trying to acquire the asset. That cannot be right, so that needs to be dealt with and picked up to clarify where we are going on that.
With regard to the comment from the noble Baroness, Lady Fox, about the cost of dealing with this—I think it was her and not the noble Lord, Lord Truscott;  forgive me if I have got it the wrong way around—fairness and justice involve considerable care, expertise and no small cost. It is a bit like the price of democracy, if you please. We should not just say that because it is expensive, it is expendable. It is not. I think the noble and right reverend Lord, Lord Sentamu, would agree with that principle.
This is an important part. The impact assessment says at paragraph 152:
“We do not expect freeholders will exit the market as following our reforms; many freeholders will continue to hold a valuable long-term interest in leasehold buildings”,
and it goes on to describe those. The problem is that we have a successive draining away of the asset that is available to those freeholders. That might be fine, were there not a particular legacy issue about which I have spoken in this House many times before, and will do again at a later stage of the Bill—I give due warning of that—which is the question of building remediation, where it is required. Ultimately, you can drain so many resources away that there is nothing left for remediation and the person who is made responsible, particularly under the terms of the Bill elsewhere, is the owner of the building.
What is to happen with the owner of the building if, as the noble Baroness, Lady Andrews, wants, permitted development rights are removed? For all sorts of reasons that I think the noble Baroness, Lady Pinnock, referred to, I agree there are some really rubbish, poor-quality additions to buildings that should not be there and have not respected the structure underneath—for instance, in terms of wind-loading and load-bearing structures and stuff like that—never mind the inconvenience to those living immediately underneath. None the less, it is there, and I suspect that if the Government were to turn around and say, “We’re going to get rid of a whole tranche of permitted development rights”, there would be another issue to do with whether compensation is not available this time, possibly not in relation to this Bill, but under planning laws. We have to be really careful about this. I am worried that there will be a default in terms of remediation—that freeholders will end up with so little that they have no skin in the game worth having any more, and that they engineer the process where they can financially exit from the whole thing.
There is one last point here, which has been made already. This is a matter of confidence in the system that we have: do we have a rules-based system or do we not? What would happen to our wider reputation as a country where investment in property and this sort of thing can be made? What else might be taken away at a moment’s notice? I fear for that. If we are not to have greater reticence and a response to risk in terms of short-termism and a degree of hedging of bets—which, in valuation terms, leads to higher costs and lower values—we need to be very careful about what we are doing. On that point, I will sit down.

Baroness Pinnock: My Lords, the debate on this group of amendments has taken an interesting turn. I was not expecting to be discussing expropriation or to hear reference to the European Court of Human Rights, particularly from those who have in the past criticised it. I was not expecting the debate to hinge on the rule of law, of which I had thought we had a good example in previous days.

Lord Moylan: I am very grateful to the noble Baroness for giving way. If there is any suggestion that I have been critical of the European Convention on Human Rights, if that remark was addressed to me, I should be glad to know when that was the case because I have never said that we should withdraw from that convention. I do not know whether the remark was addressed to my noble friend Lord Howard of Rising and not me. If that was the case, I apologise for intervening.

Baroness Pinnock: There was, of course, no mention of or reference to any noble Lord in this Chamber. It was a general reference to criticisms of that court under the human rights legislation. We have heard in debates in your Lordships’ House over the past weeks that have hinged on the rule of law. So it is most interesting, for those of us who have felt that the rule of law had been breached in the decisions that have been made, that it is now being raised in defence of these amendments. The debate has become emotive on this issue.
I hope that we can draw back from that rather, because what we have here is the Government’s intention to rebalance the rights of leaseholders as against the rights of freeholders. From these Benches, we support the rebalancing of those rights. In many cases, we think that the Government are not going far enough, but there ought to be a rebalancing of those rights. That is not referencing in this case the fact that there seems to be an argument among those who have moved or supported the amendment, that the loss of value can be defined as an expropriation. I find that difficult to accept because all along, in changes to legislation on major infrastructure projects, property is infringed and property holders feel abused. But it is for the state to make those decisions. So I am not sure why we are going to the barricades on this issue.

Lord Moylan: I am grateful to the noble Baroness for giving way. In the case of infrastructure, it is certainly true that private property owners can have their property taken away from them to allow infrastructure to be built. But this is under a compulsory purchase regime whereby they receive something approaching the market value, normally plus a premium of so many per cent on top. My amendment would ensure that those expropriated of their marriage value would receive that. Is the noble Baroness, in fact, swinging in behind my amendment? There is a clear difference between what is proposed today and the compulsory purchase regime.

Baroness Pinnock: I thank the noble Lord for his intervention. To me, the issue here is quite simple. We expect leaseholders to fund the enfranchisement of their lease—to pay the costs of the enfranchisement—and then to share the increased value of the lease with the freeholder, who has made no financial input to the extension of the lease. From a leaseholder’s point of view—although I do not have a leasehold myself—that seems to me to be the wrong balance. This is what the proposals in the Bill are attempting to put right. From that perspective, we would want to agree with that.
We are constantly warned that no investments can be regarded as safeguarded for all time. That must be true for property as it is for any other investments. We have heard arguments this afternoon about protecting freeholders, seemingly for ever. I accept the argument of the noble Baroness, Lady Deech, that phasing might be an answer to freeholders’ difficulties, but you cannot keep things in aspic for ever. Change is on the move and the Government are right to try to provide a better balance of rights and responsibilities between freeholders and leaseholders.
We on these Benches would prefer to move entirely to commonhold—but that argument has yet to be completed. I accept that the situation is very complex. Whenever we have a substantial change in legal rights, there is a loss on one side and arguments about that, and benefits on the other. Nobody can be absolutely clear and certain how the balance will be reset.

Earl of Lytton: I take the noble Baroness’s point about things changing, but I ask her to cast her mind back—although she was not there at the time, any more than I was—to the great reforms in the Law of Property Act 1925. There was a big discussion about all sorts of matters to do with tenure and getting rid of things such as entails, and modernising the system. If we are to make a seismic change—and I think this Bill will produce something of a wobble—there ought to have been that big discussion about the fundamentals of property law. Does the noble Baroness not agree that, instead of tinkering around piecemeal with this and trying to shoehorn it into the unfortunate focal point of leasehold reform and the balance between leasehold and freehold, that discussion should have taken place first?

Baroness Pinnock: I thank the noble Earl for that intervention, because he is right in many cases. I am not a lawyer, but I know that the 1925 property Act made a huge change away from the old system, which was feudal at that point, and modernised property legislation. This Bill may do the same. In some instances, as we have heard this afternoon, it will have big consequences—for freeholders, in the context of this set of amendments. I accept that maybe there ought to have been—as we heard on Monday from the noble Lord, Lord Young of Cookham—a draft Bill on commonhold. Maybe it requires an in-depth, cross-House, cross-party committee to get into the detail, rather than the 300 or so pages of the Bill that we have in front of us, in order to get to grips with the consequences of what is being proposed.
I go back to the principle, and the principle has to be right. We are trying to rebalance the rights between freehold and leasehold. There is frequent talk on the Conservative Benches that the basis of Conservative philosophy is a property-owning democracy, but leaseholders will not be full participants in that until these changes are made. So it will be interesting to hear what the Minister has to say with regard to this very challenging debate.

Lord Khan of Burnley: My Lords, this has been a more wide-ranging debate than was anticipated at the beginning of the group. The noble Lords,  Lord Howard and Lord Moylan, made some interesting points in introducing their amendments, and it is for the Minister to clarify and address her noble friends’ concerns. All three amendments in this group attempt to make changes to Schedule 4, which is where the market- value element of the premium for any enfranchisement claim is determined.
I listened to the noble Baroness, Lady Fox of Buckley, in relation to the European Convention on Human Rights. Although we have differing views on that, it is interesting how legislation and the regard for international law are debated in different debates in this House—without pinpointing any noble Lord in particular.
The noble Baroness, Lady Deech, laid out and stipulated the complexity of the issue as a teacher in property law, while the noble Lord, Lord Thurlow, as a student of property law, made some interesting points about complexity and about working and bringing change in a fair manner.
In conclusion, I ask the Minister what consideration the Government have given to the principles of grandfathering for leases of various lengths and other conditions when developing the Bill? For example, in the instance of a lease of a very short length, when the Bill becomes law, what are the ramifications of the Bill as it is written? Do the Government think that some shorter leases are going to be treated in a way that may be fairer on wider principle but do not seem appropriate, given the shorter lengths? If so, did they consider any mitigation?
I finish by referring to my noble friend Lord Truscott, who advocated in a diligent manner the ending of marriage value and talked about the wider unfairness in leasehold properties. I look forward to the Minister’s response.

Baroness Scott of Bybrook: My Lords, I thank my noble friends Lord Howard and Lord Moylan for their amendments in this group. Amendments 26 and 27 would require marriage value or possible hope value to be payable by a leaseholder who has fewer than 80 years remaining on their lease on the passage of the Act.
The Government’s stated objective is to make it cheaper and easier for leaseholders to extend their lease or acquire their freehold. We want them to attain greater security of tenure. The amendments are directly counter to our objective. In particular, they would prevent us from helping the trapped leaseholder—that is, a leaseholder with a short lease who is unable to afford to extend because of the prohibitive marriage value payable, and so is trapped with an asset of diminishing value.
We do not believe that the leaseholder should have to pay marriage value. For the freeholder, the marriage value that is payable under the current law is a windfall created by the freehold and leasehold interests being married earlier than they otherwise would have been—namely, at the end of the lease. It is a sum that the freeholder would not receive if the lease ran its course. Parliament has previously determined that the value should be split equally and the leaseholder should pay half of it to the freeholder on enfranchisement, but we do not believe that freeholders should continue to receive that windfall.
The leaseholder needs to enfranchise, because by its very nature a lease is a wasting asset. Without either extending their lease or buying their freehold, they will suffer financial loss as the lease runs down or lose possession when it has fully run down. Nor has the lease- holder meaningfully chosen to enter such an arrangement, since leasehold is very often the only available form of tenure outside the rented sector at certain price points or in certain locations. The lease- holder’s need to enfranchise is born out of their insecurity of tenure; that is, out of the inherent injustice of the leasehold system. Our objective is to enable them to obtain greater security and to address that inherent injustice. By not having to pay marriage value to the freeholder, the leaseholder’s ability to obtain security of tenure is much improved.
A third party who bought the landowner’s interest would not pay marriage value, and we do not think it is right that the leaseholder should pay more than that same interest. Requiring leaseholders to pay more than a third party—or, in other words, enabling the freeholder to profit from the sale to a leaseholder by comparison to a third party—is to punish the leaseholder for their need to enfranchise, and therefore to affirm the very injustice we are trying to address.
The noble Earl, Lord Lytton, and many other noble Lords brought up compensation. Under our valuation scheme, the freeholder is compensated as if the lease simply ran its course. We believe that this is adequate compensation; it is sufficient to reflect their legitimate property interests.
Amendments 26 and 27 would also further complicate an already complex system. They would create a new two-tier system, with different rules for leases that were under 80 years at the time of the Act and those that fell under 80 years thereafter. This is undesirable, as it runs contrary to our stated aim to simplify this complex tenure.
Before I move on to Amendment 29, I will answer one or two specifics. First, the issue of human rights has been brought up by a number of noble Lords. The Government consider that all provisions in the Bill are compatible with the relevant convention rights and that in the case of the provisions engaging Article 8 and A1P1 any interference is justified and proportionate. There is a GOV.UK page where noble Lords can read further information on that should they wish.
The noble Baroness, Lady Deech, also brought up phasing, which is important. Following Royal Assent, we will allow time for a smooth transition to a new system, while making sure that leaseholders and freehold home owners on private and mixed-tenure estates— which is an issue—can benefit from it as soon as reasonably possible. We will also support leaseholders, freeholders, landlords and agents to adjust to and understand the new rules. We will work with delivery partners to make sure that the necessary support is in place, including through the publication of appropriate guidance.

Baroness Deech: I am grateful to the Minister for those comments. It reminds me that in the case of the 1925 legislation, the centenary of which approaches us, there were six different statutes with a long lead-in  time. Apparently, many solicitors gave up practice entirely because they could not cope with the new law, so it is good to know this will be gently introduced.
On human rights, I am all in favour of the European convention; I would not want to drop it. I just find it rather dismaying that if the possible claimant were a hedge fund manager or a rich freeholder then we should not worry about them. The point about the European Convention on Human Rights is, whether you like the claimant or not, the thing must be taken as a whole; we cannot pick and choose. I would like some disassociation from the notion that hedge fund managers and rich freeholders should not have their rights considered under that convention.

Baroness Scott of Bybrook: I do not think that I will comment on that from the Dispatch Box, but the noble Baroness is absolutely right: we will make sure that it is phased in and that everybody understands it. Let us hope we do not lose too many solicitors in that journey.
Amendment 29, tabled by my noble friend Lord Moylan, would address the removal of marriage value far beyond that of a specific carve-out for charities, for example, which we are going to address specifically in the next group. The amendment would transfer the requirement to pay marriage value to freeholders in all enfranchisement claims on to the public purse. That would be unfair to hard-working taxpayers.
For the reasons I have outlined, I hope that my noble friends Lord Howard of Rising and Lord Moylan will withdraw or not press their amendments. Of course, I am always happy to meet noble Lords to discuss this further before Report.

Lord Howard of Rising: I thank the Minister for her comments. On human rights, I neither supported nor did not support them; I commented that human rights will prove a fortune for lawyers, as they argue for years and years over whether assets have been expropriated fairly or unfairly. The Minister referred to complexity; that really will bring complexity to what is at present a relatively simple situation.
When everybody is talking about this and how unfair it is on leaseholders, we should also remember that all a leasehold is is a discount on the freehold value. Somebody has paid less for that asset than they would have done had it been a freehold. If you take that logic to its full extension, why not go to the motor car industry, for example, and say that everybody who has bought their car on hire purchase should be able to have it without having to pay any more? They bought it under certain terms, as the leaseholder did—

Baroness Fox of Buckley: I suggest that one of the problems is that those who buy cars under hire purchase do not think that they are buying the car to own it. One clarification that has emerged only recently is that most people did not know when they bought a home, advertised as being sold to them, that the lease was a hire-purchase arrangement. I hope that is one of the things being clarified by this law.

Lord Howard of Rising: Sorry, but when you buy a car under hire purchase, you buy it that way: that is why it is called purchase. You are just deferring your payment over a period. That is what happened when I was in the motor industry.
I thank all those who have supported my amendment. I hope that, as the Minister said, we can return to discuss this further. In the meantime, I withdraw my amendment.
Amendment 26 withdrawn.
Amendment 27 not moved.

Amendment 28

The Lord Bishop of Manchester: Moved by The Lord Bishop of Manchester
28: Schedule 4, page 161, line 15, at end insert—“(3A) But in a case where the freeholder is a charity and the freehold interest was vested in that charity immediately before the passing of this Act—(a) assumption 2 must not be made, and(b) accordingly, marriage and hope value are payable.”Member's explanatory statementThis amendment would provide that, where the freeholder in the case of a lease extension or freehold enfranchisement is a charity which had owned the freehold interest since before the passing of the Bill, marriage and hope value are payable.

Bishop of Manchester: My Lords, while I thoroughly enjoyed that previous group, I hope this one will not prove quite so wide-ranging. In tabling these amendments, my aim is to deal with an issue that in the charity world is specific to a small number of bodies but would severely impact the work that they do. First, I am a leaseholder myself, as it happens, as set out in the register of interests. I have been through the process of extending my lease; my flat is not in London, and it was quite a simple and cheap process. Secondly, although I am no longer on the board of governors of the Church Commissioners, it is the body that pays my stipend, owns my home and covers my working expenses, so I declare that interest too.
The commissioners are directly affected by the proposals in the Bill. They would indeed benefit from my amendments but, as has already been mentioned by the noble Lord, Lord Truscott, in the previous group, that charity is large enough to withstand the adverse impact. Smaller charities would struggle much harder to maintain their work, and it is their case I seek to plead today.
As I said at Second Reading, I wholeheartedly support the central thrust of the Bill, which is to protect leaseholders from freeholders who exploit them as a cash cow. I also agree that leasehold is ripe for bold reform. I have spoken repeatedly in your Lordships’ House on behalf of victims of the cladding scandal, as well as joining them on public platforms in Manchester. My lifelong commitment to those in housing need is well known in this House and that commitment remains undiminished.
I was unable to be in my seat on Monday and I am grateful that my right reverend friend the Bishop of Derby spoke to an amendment in my name that day. Having carefully read the report of that debate in  Hansard, I have informed the Whips’ Office that I no longer intend to oppose the question that Clause 47 stand part of the Bill, nor does my co-signatory, the noble Lord, Lord Thurlow. I have taken that step as I believe my efforts at this stage are best focused on the specific issue of charities and marriage value. I apologise to noble Lords for the lateness of that decision but hope that they will take it as a sign that even a bishop can be penitent.
To focus on the subject of this group, in England there are a small number of charities, probably no more than a dozen, all of them with long and distinguished histories, which, in centuries far past, came into the possession of land lying largely within just a few miles of this House. As London grew and the land increased in value, rather than simply selling it and seeking to invest elsewhere—remember that back then there were far fewer opportunities for investment—the charities stuck with the business they knew and understood. They kept the freeholds and have used them as regular and predictable sources of income to drive their work. The charities, apart from the commissioners, of which I am aware, are John Lyon’s Charity, the Portal Trust, the Dulwich Estate, the London Diocesan Fund, Merchant Taylors’ Boone’s Charity, and Campden Charities —not a large number.
John Lyon’s Charity was gifted its land in St John’s Wood about 500 years ago. Income from being the freeholder, principally through marriage value, provides it with about £4 million per annum, which is one-quarter of its total income. Marriage value is not a matter, as we have heard, in which the freeholder can set their own arbitrary figure. It is not open to the abuses that have been associated with ground rents. It is also the case that around 80% of all marriage value is in or around the capital. This is a very London-focused issue.
The money that John Lyon’s Charity receives enables it to be one of the principal providers of youth services to some of London’s most needy children. Properties on its holdings sell for around £5 million. The leaseholders who purchase them are not London’s poor and needy. Many are not resident in the premises, which are let out to tenants. A typical leaseholder on such an estate is, as we have heard in previous debates, more than likely to be a wealthy overseas investor or corporation. I have nothing against them, but the Bill, in its present form, will transfer money used presently for youth work to these very rich organisations and individuals. It will present them with an entirely unearned windfall, hence my comments at Second Reading about this being a “reverse Robin Hood”.
I have been told that the Bill needs to be kept simple, and that making any exceptions will unnecessarily complicate it. Of course, there is already an exception for the National Trust, but I will not debate that any further. However, the simplest solution to a problem is not always the right one. In any battle between simplicity and justice, justice must always prevail.
I have also been told that it would be wrong for some leaseholders not to profit from the abolition of marriage value when others, whose freeholders are not charities, do. I will not go back as far as my good friend, the noble and right reverend Lord, Lord Sentamu, did when citing Magna Carta in the previous debate, but there is another principle that is long established:  the assets of a charity should not be alienated from it at anything less than full market value, except where those assets are being applied directly to the purposes set out in the charity’s objects clause. That principle has been applied even to such flagship Conservative projects as tenants’ right to buy, in which charitable housing associations were excepted as not being forced to sell properties at a discounted value, unless that discount was being made up from elsewhere. I have not heard any case, not even an unconvincing one, as to why leaseholders of charity-owned freeholds should be treated more favourably than charity tenants.
My amendments in this group offer one way forward. They stipulate that marriage value should continue to apply in cases where the charity owned the freehold before the Act came into effect. There would be no loophole allowing charities to purchase freeholds and apply marriage value in future, nor any opportunity for other bodies to seek to register as charities thereafter. From day one, those leaseholders with charity freeholders should know exactly who they are.
We could tighten it up even further—this is still just Committee stage. It would make little difference if the exemptions applied only to charities, or their predecessors, which owned the freehold prior to 1950, which would of course exclude most housing association leasehold properties. Given how few they are, we could even name them in a schedule. We could explore how marriage value for charities might be phased out over a period of some decades, as was referred to more generally in the previous group, instead of the impact hitting in full in the first year. We can also look at ways of compensating charities in full for the loss of assets—again, an issue referred to in the previous group. I note the Minister’s comments that to fully compensate all freeholders would be an unfair burden on the taxpayer. We are talking here about something much smaller—a small number of charities severely impacted—and I beg to suggest that that can be afforded. None of this needs to slow down the progress of this much-needed Bill through your Lordships’ House.
I am grateful to the Minister, who has already met me and representatives of some of the affected charities, written to us setting out the Government’s current position, and assured us that she remains ready to meet again. I greatly appreciate her openness to such conversations. I also appreciate the Opposition Front Bench for similarly listening to our concerns. I look forward to hearing the views of other Members of your Lordships’ House, so that the charities impacted can have a better sense of where we might find ways forward to tackle this problem. In the meantime, I beg to move.

Lord Moylan: My Lords, it is a pleasure to follow the right reverend Prelate the Bishop of Manchester, and I have added my name to his amendments.
There is a great deal that I could say on this issue but, since I said most of it in the debate on the last group, I shall keep my remarks fairly short. I can add a little personal knowledge of one charity to which the right reverend Prelate refers, because it is very Kensington-based. I have no connection with it and no interest to declare—but Campden Charities was started in the 17th century by Viscount Campden,  a devout Puritan. When he died, he left a charitable endowment, naturally in the shape of land that he owned, for the benefit of the poor youth of Kensington. His widow, when she died, did likewise with her property—hence the plural. It is Campden Charities: technically, they are two separate endowments, but they are run as one. They own land in Kensington to this day from which they have an income, and they continue to support the poor youth of Kensington—and there are poor youths in Kensington—giving them grants to allow them to continue their education and apprenticeships, and work of that sort. Their income is now going to be, to some extent by this measure, reduced and expropriated.
As I say, apparently as Conservatives we feel no embarrassment in doing this—we feel no constraint on us. We are too tender and too ginger to feel that we can expropriate the assets of ill-doers such as Putin’s friends—they are sacrosanct. But those who do good, such as charities, can have their money taken away with very little debate and handed to leaseholders who may or may not be poor and meritorious. Who knows? What is it next, I wonder, for my noble friends on the Front Bench? Shall we be stealing the widow’s mite from the poor box?

Lord Bailey of Paddington: My Lords, I want to pay tribute to Campden Charities, as I am a beneficiary of the activities of Campden Charities. I came from a community where the likelihood of one of us appearing in the Lords was next to zero, and Campden Charities is an important part of my arrival in your Lordships’ House. I point out that removing the ability of charities countrywide to provide such services would be devastating to some of the poorest communities in this country. Again, I stand here as a witness to the effectiveness of some of the work that they do.

Lord Thurlow: My Lords, it is not on the list but I did put my name to this amendment and I am very keen to support the right reverend Prelate. Much of the debate we have had so far this afternoon seems to be focused on the rich, greedy landlords versus the impoverished tenants. If we strip this away from the debate and focus on these landlords, those addressed in this amendment are charities; they do good. They are not bad actors. Their managing agents, in the case of their property investments, are not bad actors. They are responsible to the Church and they thoroughly deserve this exemption, as we were reminded very eloquently in the excellent few words of the previous speech. I proudly add my name to the amendment.

Earl of Lytton: My Lords, I am very pleased to be able to speak to this amendment and very grateful to the right reverend Prelate for tabling it. His office asked me whether I would add my name, and I am afraid I neglected to do so. Implicit in what the right reverend Prelate and the noble Lord, Lord Moylan, said is that we have within the Bill a carve-out for the National Trust as a charity that does not apply to other charities. My understanding, and I think noble Lords will know the principle, is that this  touches on and concerns the question of hybridity of a Bill. That is dangerous territory for somebody who is a non-lawyer, but none the less I raise the question, because public Bills should apply equally to all citizens and entities. If you single out one, you have to face the consequences of having a hybrid Bill.
I scanned around earlier to see how many legal minds there might be sitting around the Chamber, because I am not one and I stand to be shot down, not being a lawyer, but the matter did crop up on the levelling-up Bill and I had reason to look into that in some detail, although it was not debated in the Chamber. So I hope I am reasonably up to date in believing that the only workaround here is if the entity singled out in the legislation is what is known in the jargon of the legislator as “a class of one”. I have seen the letter dated 22 April to the right reverend Prelate from the Minister. She appears to allude to the uniqueness of the National Trust in that its lands are inalienable. I looked at the world wide web at lunchtime to see just how inalienable things actually are, because as I will explain, I am not sure that is necessarily a correct point on which to rest the case.
What I discovered, among other things, was “Battle over National Trust sale to developer”, which was a question of three acres of a meadow near Bovey Tracey in Devon in 2021. There was another freehold property on the market, and I think it was described as being a former National Trust property. I therefore assume that the National Trust is doing what other charities normally do—namely, that it gets property bequeathed to it, or it acquires property by public subscription, and that may contain bits that it wants and considers rightly inalienable, and other bits that it considers expendable. Any charitable organisation having property is required by the Charity Commissioners to make best use of its assets, and that means not having bits of deadwood floating around. It has to be organised, and that happens in any management process. So to what extent inalienability cuts into this, I am absolutely not sure.

Lord Berkeley: I am grateful to the noble Lord for giving way. Can he explain what the word “inalienable” actually means?

Earl of Lytton: I believe it means that it cannot be disposed of away from the purposes of the charity. I am not a lawyer and I am afraid I do not know exactly, but I understood it to be the term contained in the Minister’s letter to the right reverend Prelate, which is why I used it.
I want to make it clear that the organisation of a charity is necessarily of a commercial nature but devoted, ultimately, to its charitable purposes. It cannot be otherwise; it must use its assets optimally, and it is required to do so. I can see no discernible difference between something like the National Trust and an organisation such as the Church of England. Any such charity acquires, disposes and otherwise deals with its land assets as a matter of course. It is required to do so if it is disposing according to a set of rules, with which I am familiar, under the Charity Commission: CC 28, which state that you have to get best value for the asset, or words to that effect.
I am concerned about the potential hybridity aspect of the Bill, to which the right reverend Prelate did not refer, but it is implicit in what he is asking. It is a question that needs to be raised and is a procedural one for this House. I would very much like to know the answer, and if the Minister, who has not had any warning, cannot give it today perhaps she would be kind enough to write and copy in other noble Lords who are listening.

Baroness Pinnock: My Lords, I thank the right reverend Prelate the Bishop of Manchester for drawing our attention to the fact that when you make complex changes, the consequences cannot always be predicted and may not be ones we would wish to support.
The issue is one I hope the Minister will be able to help us resolve. The right reverend Prelate cited the balance between justice and simplicity. He said to always come down on the side of justice, and so would I. However, in this case, we have competing justices. The principle being advocated throughout the Bill is the justice of rebalancing the rights and responsibilities between freeholders and leaseholders to the benefit of leaseholders—a principle most of us support. The difficulty is that the justice we support has a consequence we would not support: reducing the funds available to charities whose income is based on freehold property. So, there is a conundrum for us.
The right reverend Prelate listed the charities that he thought were affected by these changes. I noted they were all London-based, no doubt because of land values in London. It is important for us to know whether this is a more extensive problem, or a London-based one. The first question we need to ask is, what other charities will be affected?
I do not have an answer to the next question: is there a workaround that mitigates the effect of the principal changes the Bill seeks to implement? I am sure the bright young things in the department could come up with a way of mitigating the outcome, so that charities do not lose their income, which is in nobody’s interest. I am confident that somebody will come up with a great way of overcoming this problem, while retaining the other justice: fairness towards leaseholders.
So, there are questions but no answers, and I look forward to hearing what the Government might be able to do.

Baroness Taylor of Stevenage: My Lords, this debate has again outlined what a huge benefit it would be to have proper, detailed pre-legislative scrutiny of Bills such as this. I hope that will take place when we get a commonhold Bill, whoever brings it forward.
In principle, I am in much of the same mind as my noble friend Lord Truscott when it comes to special pleading on marriage value. I fear that the amendments in the name of the right reverend Prelate the Bishop of Manchester are in danger of being an almighty sledge- hammer to crack not a very big nut, and my comments are made on that basis.
First, I thank the right reverend Prelate and Lynne Guyton, from John Lyon’s Charity, for meeting me yesterday to explain the issue in more detail. The issues  set out by the right reverend Prelate affect a very small number of charities, such as the ones in central London that he has outlined. They have been in place for centuries and, as was explained to me, use marriage value on lease extensions as a critical contribution to the funding of their charitable work. The leaseholders of these properties are largely offshore companies or non-residential wealthy owners, so the argument put forward by the charities is that, in this case, the benefit of marriage value has what the right reverend Prelate described as the “reverse Robin Hood effect”. The benefit currently accrues to the beneficiaries of the charity, such as youth clubs, arts projects, emotional well-being initiatives, supplementary schools, parental support schemes, sports programmes, academic bursaries and similar projects. I thank the noble Lord, Lord Bailey, for his personal testimony in this respect.
The fear is that, after the Bill has passed, the benefits will then accrue to the said wealthy offshore companies and leaseholders. I believe the Government have been in conversation with the charities concerned and have promised to look at what can be done to ensure that a very limited exception is considered. However, it is our understanding that this has not been forthcoming, and I hope the Minister will tell us where the Government have got to. Have the Government carried out any impact assessment of the way the Bill will affect charities that have long-standing property endowments solely for the purpose of enabling their charitable aims?
However, as with group 2, these amendments would amend Schedule 4, which is where the market value element of the premium for any enfranchisement claim is determined. The second amendment tabled by the right reverend Prelate the Bishop of Manchester has also applied it to the later section on loss suffered, in paragraph 32, which refers back to assumption 2. Straightforwardly, these amendments would disapply assumption 2 for charities, and thereby include marriage and hope values in determining market value.
As I said during the first Committee sitting on the Bill, we genuinely appreciate the intention behind supporting what is argued to be the unique circumstances of this small group of charities. However—and it is a big “however”—the amendment as drafted is almost certainly far too broad to encompass only their very unusual circumstances. Perhaps the Government will continue to work with right reverend Prelate and the charities concerned to see what can be done to support them; otherwise, we fear that a general amendment such as the one tabled could open a big Pandora’s box and encourage those wishing to avoid the new system of enfranchisement—which we support, of course—and there may be plenty who wish to do so, to misuse charitable status for that purpose.
The noble Earl, Lord Lytton, referred to exemptions created for the National Trust, which the Government felt were justified. Presumably, the Government feel that some exemptions are justified.
While we do not feel that the amendment as tabled would avoid some of the obvious pitfalls of creating a loophole in the stated aims of the Bill—with which we agree—I look forward to the response of the Minister about whether any progress can be made in this respect.

Lord Gascoigne: My Lords, I thank the right reverend Prelate the Bishop of Manchester, and my noble—and actual—friend Lord Moylan for their valuable contributions at Second Reading, and for the amendments that they have put forward which seek to alter the Government’s current position on marriage value and hope value. I say on behalf of my noble friend the Minister that we are grateful for all the time and engagement with the right reverend Prelate on this issue, along with the Church Commissioners and the charities which she has spoken to today.
In addition, we are grateful to all noble Lords who have spoken on this group and on the somewhat excited group previously. As has been noted, a lot of the points that I will speak to were covered in the previous discussion. I also say to the right reverend Prelate that we are always happy to meet. In answer to the noble Baronesses, Lady Taylor and Lady Pinnock, the Minister is more than happy to engage with any noble Lord who is impacted by this, as well as charities, to discuss it further.
Amendments 28 and 46 would exempt freeholders who are charities at the time of the Bill receiving Royal Assent from the removal of the requirement for leaseholders to pay marriage value, and for hope value to be payable. Before I go into detail, I reiterate the Government’s wholehearted recognition of the vital role and work that charities provide in our communities up and down the land, as has been noted by my noble friend Lord Bailey.
However, as the noble Baroness, Lady Scott, explained previously, we do not believe that leaseholders should pay marriage value. The leaseholder needs to enfranchise to prevent financial loss from the running down of their lease, and to prevent their losing possession when it ends. As has been said, we do not believe that their position, which concerns their security in their home, should be used as a basis for requiring them to pay more than a third party to enfranchise, nor that the freeholder should profit by way of windfall by selling to the leaseholder as compared to a third party. Under our valuation scheme, the freeholder is compensated as if the lease ran its course.
The good work of a charity is separable from its funding. Requiring leaseholders of charities, for no other reason than the coincidence of the nature of their freeholder, to pay marriage value when other leaseholders do not have to would be, I am afraid to say, unfair. Granting exemptions would also create an unbalanced two-tier system. By removing marriage value across the board, we will level the playing field and ensure that we are widening access to enfranchisement for all leaseholders, both now and in the future.
There have been a couple of references to the National Trust. Briefly—as I know it has been covered previously in this debate—it is a different scenario given that its land is inalienable and cannot be sold, yet it is not exempt from the removal of marriage value. I am not aware of the case that the noble Earl, Lord Lytton, mentioned, but I am certainly more than happy to look into it for him. I assume—and it is only my assumption—that it is because it is for the National Trust as an entity to decide, but I assure the noble Earl that I will look into it.
The noble Baroness, Lady Pinnock, asked about other charities that may be impacted by this beyond those that we have discussed. Again, I am not aware of any, but I am sure that that work has been done by the department. I will certainly take it back and investigate. Further to the point made by the noble Baroness, Lady Taylor, it is something on which we will continue to engage with any noble Lord or any charity that is impacted, as we have done with the right reverend Prelate.
For these reasons, I respectfully hope that the right reverend Prelate the Bishop of Manchester and my noble friend Lord Moylan will understand and therefore not press their amendments.

Lord Moylan: Before my noble friend sits down, perhaps I may address a point he made earlier which was made also by my noble friend Lady Scott of Bybrook. The idea that the Government are peddling, that if a landowner sells a leasehold or freehold interest to a third party, they do not receive marriage value, is to assume gross inefficiency of markets and complete ignorance of market participants. It is of course true that the purchaser would not pay marriage value as a separate sum, but the purchaser is perfectly aware of the potential for marriage value and will pay a price that incorporates that. To assume anything else is to assume that all those clever and evil hedge fund managers are too dim to notice what is going on. It simply is not the case. The line the Government are peddling is simply unfounded in fact and reality.

Lord Gascoigne: Obviously, I completely respect my noble friend, but I think I have answered that point.

Bishop of Manchester: My Lords, I thank all noble Lords who have taken part in this debate, which has been somewhat less emotive than the previous one. I am grateful to the noble Lord, Lord Moylan, for his support, and for his description of the good work that is done by the Campden Charities for young people in Kensington. I am particularly grateful to the noble Lord, Lord Bailey of Paddington, who spoke movingly of how that same charity has been part of what has enabled him to become the great asset he is to your Lordships’ House today, and to the noble Earl, Lord Lytton, for his helpful and insightful questions.
I am grateful to the noble Baroness, Lady Pinnock, for asking whether other charities, including those outside London, are affected. While I cannot guarantee that my list is exhaustive, I am pretty sure that if there are any that we have missed, they would quickly come forward, but I do not think that there are many.
I thank the noble Baroness, Lady Taylor of Stevenage, both for her meeting yesterday and for her support for the matter being further considered. Can we find a workaround that does not disapply the whole principles of the Bill, but which deals with the problem that these particularly good causes are going to suffer as things stand? I am very happy to look at some tighter drafting, as she suggested. I am grateful to the noble Lord, Lord Gascoigne, for his response, and for his willingness, and that of the noble Baroness, Lady Scott, to continue to engage with us on this matter.
In the previous debate, we were told that compensation for loss of marriage value would be too much of a strain on the taxpayer. We are talking about a very much smaller amount here, and I wonder whether that would be a course that we could continue to pursue in further conversations before Report. For now, I beg leave to withdraw my amendment.
Amendment 28 withdrawn.
Amendment 29 not moved.

Amendments 30 to 40

Baroness Scott of Bybrook: Moved by Baroness Scott of Bybrook
30: Schedule 4, page 161, line 24, leave out from “of” to “a” in line 27 and insert “—(a) the relevant freehold on the transfer of a freehold house under the LRA 1967, or(b) the notional lease on”Member's explanatory statementThis amendment would correct the references in paragraph 18 to what is being valued under Schedule 4.
31: Schedule 4, page 163, line 40, leave out “time of valuation” and insert “valuation date”Member's explanatory statementThis changes the terminology used in paragraph 21(2)(a) so that the correct defined term is used.
32: Schedule 4, page 165, line 26, leave out “a lease (the “lease being valued”)” and insert “the current lease”Member's explanatory statementThis amendment would avoid the “current lease” (the terminology otherwise used in Schedule 4) being referred to by a different term (“lease being valued”) in paragraph 25.
33: Schedule 4, page 165, line 28, leave out “lease being valued” and insert “current lease”Member's explanatory statementThis amendment would avoid the “current lease” (the terminology otherwise used in Schedule 4) being referred to by a different term (“lease being valued”) in paragraph 25.
34: Schedule 4, page 165, line 31, leave out “lease being valued” and insert “current lease”Member's explanatory statementThis amendment would avoid the “current lease” (the terminology otherwise used in Schedule 4) being referred to by a different term (“lease being valued”) in paragraph 25.
35: Schedule 4, page 165, line 35, leave out “lease being valued” and insert “current lease”Member's explanatory statementThis amendment would avoid the “current lease” (the terminology otherwise used in Schedule 4) being referred to by a different term (“lease being valued”) in paragraph 25.
36: Schedule 4, page 165, line 38, leave out “lease being valued” and insert “current lease”Member's explanatory statementThis amendment would avoid the “current lease” (the terminology otherwise used in Schedule 4) being referred to by a different term (“lease being valued”) in paragraph 25.
37: Schedule 4, page 166, line 21, leave out “lease being valued” and insert “current lease”Member's explanatory statementThis amendment would avoid the “current lease” (the terminology otherwise used in Schedule 4) being referred to by a different term (“lease being valued”) in paragraph 25.
38: Schedule 4, page 166, line 23, leave out “lease being valued” and insert “current lease”Member's explanatory statementThis amendment would avoid the “current lease” (the terminology otherwise used in Schedule 4) being referred to by a different term (“lease being valued”) in paragraph 25.
39: Schedule 4, page 166, line 30, at end insert—“(10A) If section 3(3) of the LRA 1967 applies to the current lease (successive leases treated as a single lease), sub-paragraph (9) is to apply only if the one of those leases which is in effect at the valuation date meets the condition in sub-paragraph (9)(a) or (b).”Member's explanatory statementThis modifies the application of paragraph 25 where successive leases are “chained” to constitute a long lease under the LRA 1967.
40: Schedule 4, page 166, line 31, leave out “lease being valued” and insert “current lease”Member's explanatory statementThis amendment would avoid the “current lease” (the terminology otherwise used in Schedule 4) being referred to by a different term (“lease being valued”) in paragraph 25.
Amendments 30 to 40 agreed.

Amendment 41

Lord Borwick: Moved by Lord Borwick
41: Schedule 4, page 167, line 31, leave out from “rate” to “and” in line 33 and insert “determined using this formula:Bank Rate at the time that the notice of intention to enfranchise is served + 5 %Member's explanatory statementThis amendment seeks to make the process for setting the deferment rate more efficient through using a fixed formula based on Bank Rate, rather than requiring the Secretary of State to set the deferment rate in regulations.

Lord Borwick: My Lords, I first declare my interest in my home, which is a long-leasehold property in London. It would not normally be declarable, but in the case of this Bill, this should be an exception. I also declare my interests as in the register in property companies, some of which are developing or have developed houses.
While I am not a great fan of a Conservative Government forcing freeholders to sell land to lease- holders, that principle sailed many years ago, and my Amendments 41, 43, 44 and 45 are designed to simplify the process in this Bill, reducing the costs for the department. They would speed up the process, perhaps by as much as 18 months, making it quicker and cheaper for the Government.
The present structure of the Bill has the price of the enfranchisement calculated by a system laid out in Schedule 4, under which the single most important factor is the deferment rate. I believe that the deferment rate is more important to the size of the actual price than the abolition of marriage value or any other factor.
What is the deferment rate? Some noble Lords believed that it must be in the Bill, but that is not so. The deferment rate, an interest rate by another name, is to be decided by the Secretary of State for DLUHC by way of statutory instrument. When will this be published? We do not know. Departments take a different time for SIs, and some take as long as five years. I have been criticised in the past for being acidic about the  Department for Transport taking as long as five years to bring forward an SI on disability matters. The point is that it is certainly not instantaneous.
The interest rate is to be set by the Secretary of State at a date to be announced in due course. I could be rather difficult and quote my right honourable friend from another place, Michael Gove, on the subject of setting interest rates. He has been a supporter of the principle that interest rates should be set not by the Chancellor but by the independent Bank of England. For many years we have had that as a common policy between all parties, yet the Bill reverses that policy, at least in respect of the deferment rate.
The Minister has said that the rate will be a market rate for about 10 years, amended only by another SI. I am afraid that markets do not work like that—they alter fast and furiously. Over the last 10 years, the national rate has varied quite widely, between 0.1% and today’s 5.25%. Yet the department will fix it for the next 10 years, subject only to review at about a year’s notice. If the department was that good, it could make a fortune in the markets rather than create legislation. It cannot be done accurately, but the department still wants to do it.
I submit that my solution is better: there should be a variable rate, varying automatically as a simple margin over base rate. We can have a debate about what that margin should be. I have proposed 5% as a probing amendment. The leaseholder will, in almost all cases, be a worse credit risk than the freeholder, and I have asked several banks about their prospective price for a loan to finance an enfranchisement. I have had a variety of suggestions, as each price will of course depend on the particular circumstances, but a margin of 5% over base rates seems to be a reasonable guess.
There are occasions when leaseholders of flats in a block have enfranchised but one in 100, say, has not come up with their share. It is not unknown for the freeholder himself to provide the finance, and I am told that a margin of 5% over base is considered reasonable by freeholders when they are the lenders.
The first thing would be to agree that the rate should be variable, to take account of current financial circumstances. My Amendment 41 achieves this. The second thing is to agree that the margin on the rate over bank rate should reflect the leaseholder’s cost of borrowing, which is consistent with the rest of the terms of the Bill, but at present I am not entirely certain what that margin should be. I look forward to other noble Lords expressing their opinions.
Amendments 43 to 45 are either consequential or the equivalent measure for leaseholds to be extended rather than enfranchised. My noble friend Lord Forsyth, who is not in his place, was going to support this proposal and may put his name to it later, if it comes forward on Report.
The noble Lord, Lord Truscott, mentioned this amendment at an earlier stage. I did not know whether I should stand at that moment or wait. I hope he will forgive me for replying to his point now. The current rate set by the tribunal is 4.75% or 5%—the noble Earl, Lord Lytton, can immediately correct me if I am wrong—so 10.25% may be wrong, but so is 4.75%  or 5%. The noble Lord, Lord Truscott, asked whether a return of 10.25% is available, but the question should be whether any lenders charge as much as 10.25%. I believe that they do, so his argument is actually an argument for variable rates. I beg to move my amendment.

Lord Moylan: My Lords, I rise to support, in general, the principle of what my noble friend Lord Borwick has said, but I am not entirely sure that we need to go into this new world that he is creating when we have a perfectly satisfactory world that already exists. I hasten to add that I am not a chartered surveyor, and everything I say is subject to correction by Members of this Committee who understand these matters better than I.
My understanding is, first, that the deferment rate exists already—this is not a new thing being invented. It is essential in any enfranchisement that you have a rate of interest at which you discount to a present value what has to be paid, because you are dealing with transactions that are theoretically happening in the future, but you are paying for them today. For that, you need a rate of interest. At the moment, that rate of interest is set in the environment of a tribunal, and the tribunal can change the rate of interest on the basis of evidence adduced to it, and the basis of argument as to why that evidence is applicable to a particular case. I am sure that to a degree it reflects market value, the circumstances of those properties and the location, whether it is central London or some other part of the country—the rates will be different. Nobody has ever thought that system to be wrong.
The second thing, and this is where I may part company from my noble friend, if I have it correct and he has not grasped the point, is that the rate currently used is a real rate. It is a rate that assumes zero inflation, because the valuations used for future value—the value of my flat in 80 years—assume that there is no inflation over that period. So the appropriate discount rate is a real rate of interest, and that may explain the discrepancy between the four-point-something per cent, on the one hand, and the 10-point-something per cent that my noble friend has come up with. In either case—whether I am right about that or he is not—we need to understand whether the deferment rate is a real rate of interest or one that incorporates inflation. In my view, that is not clear in what has been said.
The Government are proposing that this decision—currently sensitively taken on the basis of evidence and argument by an independent tribunal—should be transferred to become the arbitrary choice of the Secretary of State. This has huge implications. If you really want to make it very cheap for a leaseholder to extend their lease, or to acquire the enfranchisement of their property, all you have to do, arbitrarily, is set a very high deferment rate—because that will produce a very low present value that you have to pay. But if you want to protect the freeholder class, you would set a very low deferment rate, which would mean that the leaseholder had to pay a very large amount.
It is an entirely political choice if the Secretary of State sets the deferment rate without any constraints—it hands money to one class or the other as seems  politically suitable to you. We are asked to agree this measure with no indication, as my noble friend has said, as to what deferment rate the Secretary of State will choose. All this—whatever your views on the rights and wrongs, whether leaseholders are good people or bad people, what you should do about charities, and everything else—is profoundly unsatisfactory. We are moving from an evidence-based system to one that is essentially arbitrary. We are giving a power that is inherently political, not financial. We are doing this with no sight whatever of what the decision of the Secretary of State might be. Why on earth would we agree to this? Whether my noble friend’s solution is the correct one or we are better sticking with the current system is an important question, but why are we making changes in the first place and giving these powers away with no understanding?

Lord Young of Cookham: My Lords, I am grateful to my noble friend Lord Borwick for allowing what I hope will be a short debate on the deferment rate. I am conscious that I am a very inadequate substitute for the noble Lord, Lord Forsyth.
The deferment rate is very important, as my noble friend Lord Moylan explained. It is the current value of the vacant possession of a flat when the lease expires. According to what deferment rate you choose, it affects the premium that is paid by the leaseholder. My understanding is that the current deferment rate was set in a Court of Appeal case in 2007—the so-called Sportelli case—which ended up with the two rates that I think my noble friend Lord Moylan referred to: 4.75% for houses and 5% for flats. That was fixed nearly 20 years ago. There was a recent appeal decision in a Welsh court—I have the name in front of me but, like many Welsh names, it has a large number of consonants and very few vowels, so I am afraid that I cannot pronounce it. The appeal failed because the land valuer was not an economist, but it opened the way to an appeal to alter the rate. My noble friend Lord Moylan touched on my first question: when will the Secretary of State come to a decision? It affects what leaseholders do at the moment: whether they should wait for a preferential rate, which might be fixed by the Secretary of State, or whether they should try now, in case it moves the wrong way.
I want to raise a totally different point. At the moment, there already is a deferment rate set by the Government under the personal damages Act 1996. Using exactly the same basis as a deferment rate for leasehold, the Lord Chancellor sets the deferment rate for personal injury damages. Unlike what is proposed in this Bill, that rate changes quite often. In 2017, the rate was changed, and it was a negative rate for some time. It was changed again in 2019, and then again in 2023. It is now 0.5% for short-term cases and 3% for long-term cases. My question for the Government is: will we have two separate Secretaries of State fixing deferment rates at different times and coming up with different rates, or is there a case for rationalising the Government’s view as to what is an appropriate deferment rate?
One opportunity would be for the Secretary of State simply to replicate what the Lord Chancellor does. The Lord Chancellor has recently had a consultation  on how to fix deferment rates and has come up with a short-term rate and a long-term rate. It seems odd to me to have two totally separate systems in the Government for basically coming to the same decision—that is, deciding what the long-term rate is on a risk-free investment. I wonder whether my noble friend the Minister has had discussions with the Lord Chancellor’s department to see whether we can have a common approach to this important issue.

Baroness Pinnock: My Lords, for me, this is a very technical set of amendments, but they are very important. As we have heard, this issue can have significant implications.
I always go back to first principles. One of the aims of the Bill is to make enfranchisement cheaper than it is currently, and so more readily available. However, as we have heard, that will entirely depend on the deferment rate and how it is set. My understanding was that the current deferment rate was set by the Court of Appeal in 2007, as the noble Lord, Lord Young of Cookham, said. The debate is around whether it is right for that to continue; whether another process should be used, such as that proposed by the noble Lord, Lord Borwick, in his amendment about using the bank rate as a base for setting a deferment rate; or whether, as in the Bill, the responsibility is passed to the Secretary of State to determine the deferment rate. I have to agree with the noble Lords, Lord Moylan and Lord Young of Cookham, that the latter does not seem right.
When I was investigating the deferment rate issue, I noticed that Homehold Services Ltd gave evidence to the Commons Public Bill Committee that was very telling. It criticised the fact that the “applicable deferment rate” was referenced throughout the Bill
“without specifying what this will be”.
It provided an example of what effect a change in the deferment rate could have on the cost of enfranchisement. It said:
“A lease extension … on a £200k flat with 80 years unexpired and no ground rent would be c. £4,000”.
That is the example given by Homehold Services Ltd; as it is one of the experts, I thought it might be right. It continues:
“If the deferment rate was reduced from 5% to 4%, the premium would increase to c. £8,500. At 3.5% it would be … £12,000”.
Those small changes in percentages have very high consequences for the leaseholders. This is important—that is what the evidence told me when I read it.
The argument from Homehold Services Ltd was that the deferment rate must be set no lower than that set by the appeal judgment in 2007. Otherwise, the consequence is that the rate can escalate considerably, as the noble Lord, Lord Moylan, pointed out. The cost of enfranchisement would increase, removing the ability of many leaseholders to continue with the process—contrary to one of the objectives of the Bill. Can the Minister say what consideration the Government have given to the deferment rate?
The noble Lord, Lord Young of Cookham, said that the Chancellor’s department has had a consultation on this and come up with some figures. Why are those not being adopted in this instance to set the rate in the  Bill? As we have heard, it is very important to know exactly what the deferment rate will be. I do not believe that it is satisfactory to leave the applicable deferment rate to be set by a statutory instrument some time in the future. Surely, if the Government’s intentions are as they are set out in the Bill—to make it cheaper for leaseholders to enfranchise—one of the key rates must be this one. Therefore, I would have thought that we would want to see it set during the course of this Bill, rather than wait for a statutory instrument.
I have a lot of sympathy with the arguments that have been made by the mover of the amendment and others about the need for certainty here, rather than a principle and uncertainty as to the exact figure at which the deferment rate will be set.

Lord Khan of Burnley: My Lords, I will speak to Amendment 42 in the name of my noble friend Lady Taylor of Stevenage, which was well supported by my noble friend Lord Truscott in his earlier remarks.
Deferment rates are a phenomenally complex area to understand, and the standard valuation method in Schedule 4 is extremely technical. The Law Commission set out options. It did not make recommendations, but the Government have chosen to allow the Secretary of State to prescribe the applicable deferment rate. I thank the noble Lord, Lord Borwick, for his contribution and for seeking to make the process for setting the deferment rate more efficient and asking for more clarity and certainty.
Our amendment is clear and would ensure that, when determining the applicable deferment rate,
“the Secretary of State must have regard to the desirability of encouraging leaseholders to acquire their freehold at the lowest possible cost”.
We understand that the 2007 Cadogan v Sportelli judgment, which has broadly set deferment rates, was made in the context of 0.5% interest rates. If the Government are minded to remain of the view that the Secretary of State should fix the deferment rates, how best should they do that? Although it may work in London, what would need to be taken into account for other parts of the country? Is there a need to set multiple rates for different parts of the country to deal with the variations?
I want to explore the prescribed rates a bit more and how they can function most effectively across the country. On balance, however, we believe it is right that the Secretary of State be given the power to set both the capitalisation and the deferment rates used to calculate the price payable on enfranchisement or extension. It may indeed be the case that the Sportelli judgment has produced deferment rates that are broadly adhered to as a starting point in most claims for leases with at least 20 years to run, but there are real problems in relying on a 17 year-old case to maintain generic rates over the long term.
As with much of the Bill, we await future regulations to understand the process by which the Secretary of State will determine those rates and what the initial rate that he determines will be. This is a point that the  noble Lord, Lord Young of Cookham, and the noble Baroness, Lady Pinnock, alluded to. I will be grateful if the Minister could confirm whether it is the Government’s intention, before they introduce the regulations required to bring the new processes into force, to undertake a public consultation on precisely how the applicable deferment rate should be determined.
When it comes to the regulations required to bring the new valuation process into force, we recognise that they are the means by which the detailed methodology for setting the applicable deferment rate will be brought forward. However, while it would not be right to pre-empt those regulations at this stage, we believe that the objective underpinning the setting of the deferment rate should be set out in the Bill, as the noble Baroness, Lady Pinnock, also mentioned. How the Secretary of State sets the rate and what it should be are crucial to the premiums that leaseholders will pay. Can the Minister provide some clarification on this?
While the rate or rates will need to be set at a level that does not unfairly strip freeholders of value, we think it is important that the Bill states clearly that in determining what should be the rate or rates, the Secretary of State must have at the forefront of their mind the need to reduce premiums for leaseholders. While other considerations will clearly need to be taken into account, not least how to ensure that landlords receive adequate compensation to reflect their legitimate property interests, this amendment would oblige the Secretary of State to set a rate or rates with the overriding objective of encouraging leaseholders to acquire their freehold at the lowest possible cost. It is important as it is the deferment rate that will be the primary driver of price to be paid by leaseholders in enfranchisement or extension claims.
It is essential that reducing premiums for leaseholders is the determining factor in the process by which such a rate or rates will be set and reviewed; therefore, it must be put in the Bill. I hope the Minister will give due consideration to our amendment, and I look forward to her response.

Baroness Scott of Bybrook: My Lords, I thank the noble Baroness, Lady Taylor, and my noble friend Lord Borwick for Amendments 41 to 45 in this group. I turn first to the series of amendments tabled by my noble friend, and I thank him for his constructive engagement with me and for the time he spent in trying to address this vital matter.
Amendments 41 and 43 to 45 would seek to replace the current provisions in the Bill, which will allow the Secretary of State to set the deferment rate used in enfranchisement valuation calculations, as well as removing a requirement to review these rates every 10 years. Instead, these amendments would require the deferment rate to be prescribed by a formula, which would be based on the Bank of England’s base rate plus 5%. The specific deferment rate would then be calculated based on the date of the leaseholder’s enfranchisement claim.
As I have discussed with my noble friend Lord Borwick, this is one potential solution for setting the deferment rate, but it is not the only one. I am aware of the importance of the deferment rate to both leaseholders and freeholders, and it is important that we take the  time to take this decision carefully. There are serious consequences with any attempt to prescribe the methodology for setting the deferment rate in the Bill; this would tie the hands of this Government, and successive ones, in terms of adapting the approach if the need were to arise. It is also important that the Government retain their role in providing balance between market stability and the need to review the rates. It is the Government’s view that the proposals in the Bill enable this balance, and it would therefore be inappropriate, at this stage, to prescribe in the Bill the methodology for setting the deferment rate.
These deferment rates are a really important part of the Bill. At the moment, it is difficult for leaseholders to understand how much they may have to pay to the landlord when they enfranchise. Different rates are used across the country and across the industry on a case-by-case basis. The deferment rate is used to calculate the reversion value, and this provides the landlord with the compensation for the value of the freehold property with vacant possession in the future; that is, at the end of the lease. Prescribing these rates and using them to develop an online calculator, which will help leaseholders understand what they may have to pay, is also important. These rates will be prescribed at a market value to ensure that the amount that landlords are compensated reflects their legitimate property interests. These are important decisions.
The noble Lord, Lord Moylan, asked about the timing; this could take years and years, but we do expect the majority of these reforms to come into effect in 2025-26, as set out in the Bill’s impact assessment. Obviously, this may change, but that is what we expect. We will continue to carefully review all the information and views shared on the setting of rates, and I welcome any further thoughts that the Committee has on this matter.

Lord Moylan: Does my noble friend the Minister have a moment to give a response to my query about whether the Government regard the deferment rate as a real interest rate or one that incorporates inflation? I ask because the calculation, as I understand it, assumes zero inflation in the value of the asset over the time to the point at which it is being valued, and that a real interest rate is therefore appropriate. Is that her assumption or is she assuming an inflation-based interest rate, which, I suggest, would have consequences for how the asset is valued at the end of the term during which it is assessed? Does she have any comments on that?

Baroness Scott of Bybrook: I reiterate that this is why we would like the Secretary of State to be involved because it is complex and there needs to be a balance. I will come back to the noble Lord with any further comments, but this is why we would prefer the Secretary of State to have this role, to make sure that we are balancing the market at the time with leaseholders’ representation.
I turn to Amendment 42 from the noble Baroness, Lady Taylor, which would require the Secretary of State, when prescribing the deferment rate used in the enfranchisement valuation calculations, to set this at a level that would encourage
“leaseholders to acquire their freehold at the lowest possible cost”.
I assure the noble Baroness and the Committee that the Government are committed to making enfranchisement cheaper and easier and that these reforms will achieve that aim.
I understand how vital setting rates is for enfranchisement premiums. This very proposal was discussed in the other place, and I reiterate the importance of not constraining the Secretary of State via the Bill when making such important decisions. We have been clear that we will set the rates at the market value and recognise that many different elements need to be considered when setting them, as I have just reflected to my noble friend. We continue to have conversations with all relevant stakeholders. As I said, I welcome members of the Committee sharing their views on this matter so that the Government can take them into consideration when making a final decision. For these reasons, I ask my noble friend—

Lord Borwick: I am sorry to interrupt my noble friend again. One of the problems I see with this is the great difficulty in making a change except through statutory instruments, and the amount of time this takes. Whenever the Secretary of State decides that a change must happen, it must happen more quickly than through the route laid down in the Bill. At present, the amount of time doing the statutory instrument, and the fact that we cannot debate its details or change it, makes the whole thing very unfortunate.
There is something to be said for the point, made by my noble friend Lord Young of Cookham, that there is a route through that is used by the Lord Chancellor. I had not appreciated that the deferment rate had so many different implications. I am sure we could call it something different for this purpose, and thus carve out the rate for property matters. But, with a delay of one year or more between a decision and taking action, it is a very difficult subject to structure using the statutory instrument route.

Baroness Scott of Bybrook: My noble friend is absolutely right, and that is why we have not made this decision. We want to get it right, and that is why we listened to everything everybody said in this place and the other place. We will come back to my noble friend with our deliberations. This is important, and speed will also be important: you cannot take a year to change things that need changing, because of the market. They have to be dealt with in a timely manner.
Regarding my noble friend Lord Young’s point about the Lord Chancellor, I will take it back to the department and see whether any discussions have been had on a common approach, and if not, why not, and whether we should have those discussions.
For the reasons I have given, I ask my noble friend to withdraw the amendment.

Lord Borwick: My Lords, I thank everybody for their constructive points and for the education that I have received through this process. I beg leave to withdraw my amendment.
Amendment 41 withdrawn.
Amendments 42 to 46 not moved.
Schedule 4, as amended, agreed.
Schedules 5 to 7 agreed.

  
Clause 37: Costs of enfranchisement and extension under the LRA 1967

Amendment 47

Baroness Taylor of Stevenage: Moved by Baroness Taylor of Stevenage
47: Clause 37, page 33, leave out from line 12 to line 6 on page 34Member's explanatory statementThis amendment would leave out the proposed new section 19C of the Leasehold Reform Act 1967, and so ensure that leaseholders are not liable to pay their landlord’s non-litigation costs in cases where a low value enfranchisement or extension claim is successful.

Baroness Taylor of Stevenage: My Lords, we welcome the new costs regime provided for by provisions in the Bill, because, as things stand, there is no balance of power: the playing field is tilted very much in favour of landlords rather than leaseholders, and that needs to be addressed. Under the current law, leaseholders are required to pay for certain non-litigation costs incurred by their landlord when responding to an enfranchisement or lease extension claim. That obviously does not reflect normal practice in residential conveyancing, where each party bears their own costs. I hope that noble Lords will forgive me for explaining our rationale for this amendment in a bit more detail than is customary for me, but it is a point of real principle, and some technical detail is warranted.
Noble Lords will remember that I quoted from a letter I had received from elderly leaseholders on the first day of Committee. I have received further representations in relation to excessive charges for non-litigation costs, which I will read out as they are a perfect illustration of the problem these amendments seek to address. I appreciate that this example relates to a ground rent dispute, but it would be the same issue for an enfranchisement or extension claim.
“After the Freeholder asks a ridiculous sum in increased ground rent with their ground rent review (every 4 years) this causes the leaseholder to then employ both a Solicitor and Surveyor to counter this high valuation which incidentally had no calculations to back it up. Therefore so far this year having paid £3,000 for a surveyor to dispute this figure and a lawyer costing so far £3,600, the freeholders haven’t even tried to justify their huge increase and valuation. Now after 4 months having passed and the 3-month negotiation ended and the Freeholders have made no effort to take part, negotiate or even contact our surveyor they now say this increase is NOT agreed …
If we lose with the third-party surveyor’s estimate and the increase is even only minimal we still have to pay the third-party surveyor’s fees plus the freeholder’s lawyer’s fees and our own lawyer’s fees, therefore it could end up costing as much as £15,000. Plus if they look to backdate the increase over the past 6 years’ Ground Rent charges this could amount to who knows what?
Even if we win we still lose a great amount of costs and fees plus we cannot look forward to a reduction in Ground Rent as the lease states an ‘Upward Only Revision’. Therefore freeholders know they can put in totally unrealistic figures for rent increase of whatever they want as the leaseholders are on a hiding to nothing … until they throw in the towel.
Additionally, to lodge a dispute at the 1st Tier Tribunal for any high unreasonable charges it is necessary to not pay the bill in question otherwise it is deemed you have agreed to this payment but then withholding payment runs the risk of forfeiture”,
which we will discuss later today. My correspondent goes on to plead that the issue of ground rent increases finally be resolved by the Bill, but their case illustrates the financial and legal minefield that leaseholders face.
The argument for imposing non-litigation costs has always been that, in enfranchisement or lease extension claims, a landlord is being forced to sell his or her asset, which would justify a departure from the practice in open market sales of residential property. However, when it comes to lease extensions or freehold purchases, a landlord is obviously not simply being compensated for the value of the asset they are being compelled to sell. They are instead securing, through the payable premium, a share of the profit to be made from selling to the leaseholders in question. In addition, as things stand, through capitalised ground rents, they are extracting funds from leaseholders over long periods—often decades —prior to securing that profit share, for no explicit services in return.
The valuations of lease extensions and freehold acquisitions under the existing statutory regime rely on prices agreed via an open market transaction, but those valuations do not account for the fact that leaseholders are expected to pay their landlord’s non-litigation costs. Therefore, landlords in enfranchisement or extension transactions receive the price for the asset being sold, which reflects the market rate without non-litigation costs factored in, and their reasonably incurred non-litigation costs on top.
In its 2020 final report on enfranchisement, the Law Commission is very clear that the effects of law and current market practice are that
“the landlord is over-compensated for the non-litigation costs that he or she has had to incur in order to transfer the interest to the leaseholder”.
In addition, many of those who are better resourced could use the fact that such costs are borne by leaseholders as leverage in negotiations on the price of the lease extension or freehold acquisition, confident that the expense of challenging those costs in a tribunal would dissuade many leaseholders from doing so.
The Opposition are clear that freeholders should not receive compensation in respect of non-litigation costs. A landlord selling his or her asset and receiving a share of the profit as a result is not sufficient justification for departing from an arrangement in which reasonable non-litigation costs are factored into the ultimate price. The decision to enfranchise or extend a lease is often not discretionary; it is often a requirement brought about by the fact that a lease is due to expire, because the payable premium is rising as the lease shortens, or as a result of the decision to move or remortgage.
We therefore fully support the intention in the Bill to provide for a new regime based on the principle that leaseholders are not required to pay the freeholder’s non-litigation costs in these circumstances. We note the Law Society’s concern that landlords are being asked to bear their own non-litigation costs, despite the fact that the proposed standard valuation method  provided for by Schedule 2 will lead to payable premiums below full open market value because it caps the capitalisation rate. However—and this point touches on one of our previous debates—political decisions set the rules of the game for market competition. In our view, it is simply not the case that there is some kind of inherent market value for premiums entirely independent of legislation in this area. Every sale of a flat and every lease extension process relating to a flat since 1993 has been undertaken against the backdrop of the 1993 Act, which reduced ground rents to a peppercorn.
The market value for premiums is shaped by the laws that the House passes. It is right in principle that, to achieve the Bill’s objectives of making it cheaper and easier for leaseholders in houses and flats to extend their lease or buy their freehold, leaseholders do not pay non-litigation costs in addition to the payment of a premium, as determined by the new method proposed in Schedules 2 and 3. We believe that leaseholders should not be liable for these costs as a result of an enfranchisement or lease extension claim on principle, irrespective of the method by which the premium is calculated. That is why we take issue with the clause as drafted, because it does not protect all leaseholders from liability for costs incurred.
The clause as drafted entails only a selective extension of rights in this area, because it does not ensure that all leaseholders will no longer have to pay their freeholder’s costs when making a claim. Instead, it makes exceptions to the general rule, whereby the price payable for the freehold or extended lease is below an amount to be prescribed in regulations.
We understand the rationale—namely, that leaseholders should pay a freeholder’s non-litigation costs in such circumstances, so that low-value claims do not cost the freeholder money. The Minister has been very clear that the Government believe that this must happen to ensure that the process is fair for both sides. We also appreciate that there are risks in prohibiting a landlord from passing on non-litigation costs to leaseholders in cases where they would be required to spend more in carrying out the transaction than they received for the asset. The Law Commission highlighted a number of those risks, including the incentive created for landlords not to co-operate with a claim, or for them to transfer the low-value freehold into the name of a shell company and then liquidate the company.
However, we are concerned that exempting claims below a certain value will create a different set of practical problems. These include costly and time-consuming disputes in cases in which the price payable is close to the level of the non-litigation costs in question for low-value claims, and the potential for landlords to game the system by arguing for a price payable below the threshold in order to secure both it and associated non-litigation costs because of the burden of disputing the amount.
Taking a step back, we fail to see the logic in the Government’s position. On the one hand, they seem to be ignoring the Law Commission’s recommendations in relation to costs; they have chosen to provide for a general rule that leaseholders are not required to make a contribution to their landlord’s non-litigation costs, but have not chosen to adopt a valuation methodology that seeks to reflect open market value, which was the  commission’s stated prerequisite for such a rule. On the other hand, they are following strictly the commission’s recommendations in respect of low-value claims.
Put simply, we believe that, by means of this Bill, we should take the political decision to remove any exception to the general rule that leaseholders are not required to pay the freeholder’s non- litigation costs in such circumstances. I hope the Minister will give this careful consideration; otherwise, this section of the Bill has the potential to undermine the stated aim to increase, simplify and reduce the cost of enfranchisement. I beg to move.

Baroness Thornhill: My Lords, when we started the debate today, I felt like I was wading in mud. I feel I am still in the mud—it has got thicker, and the fog has come down. This is a complex and complicated Bill. I have really enjoyed listening to the arguments and the debate; I have already learned a lot. Report will be a lot better—certainly for me.
I will try to keep my remarks short and my questions simple in order to seek clarification. The noble Baroness, Lady Taylor, has, in her own style, ably illustrated the issue and set out the case for her amendments in great detail. I will not repeat those—some paragraphs have already been knocked out of my speech.
The newly inserted Sections 19A and 89A set out the general rule that neither a current nor a former tenant is liable for any costs incurred by another person because of enfranchisement or a lease extension claim. However, new Sections 19C and 89C set out the exceptions to this rule. The debate is around whether these exceptions are justified. We are seeking the Government’s justification for this variance. Amendments 47 and 48 from the noble Baroness, Lady Taylor, would delete these exceptions, so that leaseholders would not be liable to pay their landlord’s non-litigation costs under any circumstances. We agree. Each side should pay its own costs; we are unsure as to why this is not the case.
When this was debated in the Commons, the Government argued that, while the main aim of the changes to the costs regime was to address the imbalance of power that has existed between the landlord and tenant, they had a desire to ensure fairness on both sides. Sections 19C and 89C prevent the landlord incurring a net financial loss when leaseholders exercise their rights to enfranchisement and lease extension, thus acknowledging that this really is a balancing act. We look forward to the Minister’s comments as to how the Government have managed to keep the scales level.
I agree with the comments made in the debates on the last two groups. Some of the problems are because much too much is being left for later regulations, in either guidance or SIs. I believe that we should have had a clear government position on issues as important as landlord costs, deferment and capitalisation rates. This is still too vague. Such uncertainty is bad, not only for the leaseholders but for us parliamentarians who would hope to scrutinise and improve the legislation. However, I note the explanation from the Minister in the last group.
The Law Commission’s report highlights that the current law means that the landlord is overcompensated for these non-litigation costs. We support the Government  in saying that costs should be balanced. It has to be said that these amendments raise important questions as to whether new Sections 19C and 89C undermine this aim. The noble Baroness, Lady Taylor, has made a good case to that effect.

Lord Gascoigne: My Lords, I thank the noble Baroness, Lady Taylor, for her Amendments 47 and 48, which seek to remove the exception on costs arising from low-value lease extension or freehold acquisition claims. While the Bill includes a new general rule that each side will bear its own costs, we believe that there need to be exceptions in certain circumstances so that the regime is fair for both sides. The low-value cost exception entitles landlords to receive a portion of their process costs from leaseholders in low-value enfranchisement and lease extension claims for flats and houses respectively. We believe that these are necessary provisions that protect landlords from unfair costs.
The noble Baroness, Lady Thornhill, said that this is sometimes like wading through mud. I say from the Dispatch Box that she is not alone in that feeling. Also, it is great to hear another northern and Lancastrian accent in the Chamber.
On the issue of balance, it would be unfair if landlords incurred a net financial loss when leaseholders wished to exercise their statutory right to extend their lease or buy their freehold. If the exception were removed from the Bill, this could happen in claims where the premium the landlord receives is less than their process costs.
The noble Baroness, Lady Taylor, cited some cases, which I was very sorry to hear, but my understanding is that, if landlords seek to demonstrate that costs are marginally below the low-value claim threshold to receive a prescribed sum, that is not how the low-value exception works. Landlords are not eligible for a fixed proportion of their claim if the low-value costs exception applies. Instead, they are eligible to receive the difference between their costs and the low-value threshold. For instance, if costs were a few pounds below the threshold, the landlord would be eligible to receive a prescribed sum of that amount only, and not a large proportion of their overall costs.
The exception for low-value claims is a necessary provision to protect landlords from unfair costs and, as has been noted, it implements the Law Commission’s enfranchisement recommendation 84. I kindly and respectfully ask the noble Baroness not to press her amendments.

Baroness Taylor of Stevenage: I thank the noble Lord for that reply to my amendments. I am grateful for his reassurance about the costs relating to the difference between the low-value claim and where it ends up. That is a useful clarification. However, we will think through the possible implications of this before we get to Report. It seems iniquitous that the leaseholder is taking all the burden of any reduction in the value of the property and in the value of the lease, while the freeholder is exempted from that because they will then get their costs paid if that happens to be  the case when the transaction takes place. We will give that some more thought before Report, but for now I am happy to withdraw my amendment.
Amendment 47 withdrawn.
Clause 37 agreed.

  
Clause 38: Costs of enfranchisement and extension under the LRHUDA 1993
  

Amendment 48 not moved.
Clause 38 agreed.
Clauses 39 and 40 agreed.

  
Clause 41: Amendment of Part 1 of the LRHUDA 1993

Amendment 49

Baroness Scott of Bybrook: Moved by Baroness Scott of Bybrook
49: Clause 41, page 51, line 10, at beginning insert “the appropriate tribunal may”Member’s explanatory statementThis amendment would correct an error.
Amendment 49 agreed.
Clause 41, as amended, agreed.
Clauses 42 to 44 agreed.

  
Schedule 8: Leasehold enfranchisement and extension: miscellaneous amendments

Amendments 50 and 51

Baroness Scott of Bybrook: Moved by Baroness Scott of Bybrook
50: Schedule 8, page 196, line 17, leave out “paragraphs 11 to 15” and insert “this Part of this Schedule”Member’s explanatory statementThis amendment is consequential on the removal of the amendment to the Housing and Planning Act 1986 in paragraph 16 of Schedule 8.
51: Schedule 8, page 199, line 34, leave out from beginning to end of line 3 on page 200Member’s explanatory statementThis amendment is consequential on alternative amendments to the Housing and Planning Act 1986 being made in the new Schedule of consequential amendments to be inserted after Schedule 8.
Amendments 50 and 51 agreed.
Schedule 8, as amended, agreed.

  
Clause 45: LRA 1967: preservation of existing law for certain enfranchisements

Amendment 52

Baroness Scott of Bybrook: Moved by Baroness Scott of Bybrook
52: Clause 45, page 55, line 37, at end insert—“(4) Subsection (1) does not apply in any of the following cases—  (a) the tenancy was created by the grant of a lease under Part 5 of the Housing Act 1985 (a “right to buy lease”);(b) the tenancy is, by virtue of section 3(3), treated as a single tenancy with a tenancy created by the grant of a right to buy lease;(c) the tenancy is a sub-tenancy directly or indirectly derived out of a tenancy falling within paragraph (a) or (b);(d) the tenancy was granted under this Part in substitution for a tenancy or sub-tenancy falling within paragraph (a), (b) or (c).”Member’s explanatory statementThis amendment would prevent the tenants listed from exercising the right in new section 7A of the LRA 1967 to have that Act apply without the amendments in the Bill.
Amendment 52 agreed.
Clause 45, as amended, agreed.

Amendment 53

Baroness Scott of Bybrook: Moved by Baroness Scott of Bybrook
53: After Clause 45, insert the following new Clause—“Part 2: consequential amendments to other legislationSchedule (Part 2: consequential amendments to other legislation) contains amendments to other legislation that are consequential on this Part.”Member’s explanatory statementThis new Clause would introduce the new Schedule on consequential amendments to be inserted before Schedule 9.
Amendment 53 agreed.

Amendment 54

Lord Young of Cookham: Moved by Lord Young of Cookham
54: After Clause 45, insert the following new Clause—“Crown Application(1) For section 33 of the LRA 1967, substitute—“33A Crown land(1) References in this Act to “Landlord”, include the Crown Estate and the Crown where the Crown Estate or the Crown hold freehold land subject to long leases, howsoever such freehold land is held or acquired, including land falling to the Crown as demesne, or by Escheat.(2) The prevailing standard method of dealing with lease enfranchisement in the market, is the method of valuation and calculation of fees for enfranchisement, the extension of leases, or grant of a new freehold title for Escheat land held by the Crown Estate, the Crown, in accordance with this Act, and applies to all leaseholders seeking to enfranchise their leases.”(2) LRHUDA 1993 is amended as follows.(3) Omit section 88.(4) For section 94, substitute—“94A Crown Application(1) References in this Act to “Reversioner” and “Landlord”, include the Crown Estate and the Crown where the Crown Estate or the Crown hold freehold land subject to long leases, howsoever such freehold land is held or acquired, including land falling to the Crown as demesne, or by Escheat.  (2) The prevailing standard method of dealing with lease enfranchisement in the market, is the method of valuation and calculation of fees for enfranchisement, the extension of leases, or grant of a new freehold title for Escheat land held by the Crown Estate, the Crown, in accordance with this Act, and applies to all leaseholders seeking to enfranchise their leases.””

Lord Young of Cookham: My Lords, this amendment deals with the obscure but important issue of escheat, which I suspect will empty the Chamber. When I was a Minister and put the 1993 leasehold Bill on the statute book, I made a statement to Parliament that, although the Crown was not bound by the various leasehold reform Acts, it would in practice follow the provision of such Acts relating to enfranchisement, lease extensions and collective freehold purchases.
However, there is a difference between where the Crown holds a freehold and accepts the responsibility of a landlord and where the Crown holds the land in escheat. William the Conqueror decreed that, henceforth, all land in the realm belonged to the Crown. The Crown would grant fee simple—freehold interests held from the Crown—on the one hand and leasehold interests on the other. Thus, where a freeholder dies without a beneficiary who can inherit the land, or where a freeholder company is liquidated, the asset falls back to the Crown. If the Treasury Solicitor disclaims the land, it falls into escheat and the original title is extinguished.
This creates a problem, and I apologise for talking legalese. If a non-escheat freehold is vested in the bona vacantia division of the Treasury Solicitor, existing tenants can, as per my statement to Parliament, serve notice on the Treasury Solicitor of their intent to enfranchise their leases, collectively or otherwise. The current government guidelines, set out on GOV.UK, then apply. That is form BVC4. The premium payable is calculated by a straightforward multiplier of the ground rent, plus a contribution to the Treasury Solicitor’s legal costs.
However, where land falling into escheat previously comprised a freehold subject to long leases, the Crown accepts no responsibility as the landlord. It neither collects the rent nor complies with the landlord covenants under the long leases. More importantly, with reference to escheat land, the Crown does not currently accept any responsibility under the leasehold reform Acts. This gives no opportunity for the long lease holders affected to extend their leases or purchase the freehold, pursuant to the provision of the leasehold reform Acts. They are left in limbo. It is worth remembering that, where properties are owned freehold by private individuals or companies, qualifying leasehold owners in those properties have a legal right under the Acts to enfranchise, unlike where the freehold is held in escheat.
The Crown can offer the sale of a new title, subject to the existing leases, or respond to an application by tenants to enfranchise but, crucially, it is not bound by any guidelines or formula, as would be the case under the said Acts. It arbitrarily sets its own legal and valuation fees without any mechanism for control. Equally, there is no formula for calculating the price, so in practice the Crown can ask what it wants, plus the costly fees of the private consultant lawyers and valuers, on a take-it-or-leave-it basis. This is at odds with its stated policy to return assets it controls to private ownership quickly and efficiently.
The impact of what I have just described clearly conflicts with the stated intent of the Bill—namely,
“to amend the rights of tenants under long residential leases to acquire the freeholds of their houses, to extend the leases of their houses or flats, and to collectively enfranchise or manage the buildings containing their flats”.
By way of illustration, I have been made aware of a case where the Crown Estate is demanding an inflated premium, plus expensive private consultant lawyers’ and valuers’ fees, which total four times the total cost of what the premium and fees for an enfranchisement would be under the BVC4 formula that I mentioned a few moments ago. This is not justifiable or equitable, and it is wrong that, where the asset is effectively controlled by the state, namely through part of the same government department, the Treasury, this behaviour should take place.
As the unexpired term of the leases becomes shorter, it becomes increasingly difficult and costly for these leaseholders to raise capital on the asset. The inevitable result is that many leasehold owners are unable to afford the inflated premium and the fees demanded by the Crown to ensure that the housing stock is compliant and fit for purpose. So long lease holders where escheat applies are left powerless and exposed to the whim of the Crown’s legal consultants and surveyor representatives. These anomalies need to be brought into the 21st century to keep in step with the intent of the Bill.
My amendment is designed to provide a level and equitable playing field for all long leasehold owners. The Crown must accept that all Crown land, whether held in escheat or otherwise, must be subject to the provisions of the various leasehold reform Acts, subject to specific exceptions only where land is of a nationally sensitive nature.
To conclude, I hope that my noble friend will undertake to get those assurances that I have just referred to from the Crown Estate and the Treasury. I beg to move.

Lord Berkeley: My Lords, I follow that interesting speech by the noble Lord, Lord Young of Cookham, which explained his amendment clearly. It may be that the amendments in my name in this group, Amendments 93A and 106, are not necessary—but I am not certain yet, because it is a complicated subject, shrouded in mystery and secrecy sometimes. So I should like to speak to those two amendments as well and hope that we can have some good discussions, meetings and so on, between now and Report with the noble Baroness the Minister to see whether there is a solution.
My amendments refer only to the Duchy of Cornwall: let us be quite clear about that. That is partly because I do not think that the other two members of the Crown need it in the way that I am speaking, because they do not have lots of residential properties. Secondly, if one reads the Law Commission report, which went into some detail, one sees that the Crown Estates and the Duchy of Lancaster both agreed to comply with what the Law Commission recommended, whereas the Duchy of Cornwall did not. So we need to we need to consider some special legislation to cover just the Duchy of Cornwall’s ownership of land.
The other reason for saying this is that the Duchy of Cornwall, unlike the other two Crown groups, is in the private sector. It states quite clearly on its website that it is in the private sector. The argument is that it should be treated differently from other big estates, such as Cadogan, Richmond, Devonshire, and so on. They are all in the private sector and my understanding is that, whether they like it or not, they are going to go along with whatever happens with this legislation when it is accepted. But the Duchy of Cornwall will not do so.
I live in the Isles of Scilly, as noble Lords probably know, and I have a number of friends who have been trying to enfranchise and have been turned down. It is not a question of them looking for a 99-year or 999-year lease. Some of them want 50-year leases and they cannot have them, either, because the Duchy does not like it. So nobody who leases from the Duchy of Cornwall at the moment can enfranchise. That is unfair on the people who live there. The population is about 2,500 and they should be treated like everyone else in this country. Whatever the legislation says, they should do it.
The duchy’s argument, which goes to some length and is repeated in the Law Commission’s report, states all the wonderful things that the duchy does as a kind of landlord in Scilly. Well, it is not really true. The Scillies have a council, a local authority, like any other area. They have a Member of Parliament, water services and national landscape designation. I could go on with a long list of all the organisations, but the environmental concerns are properly looked after and there are even marine protected areas around there. I think the people of the Isles of Scilly would say that they are well set up to manage themselves, just like any other part of the UK. I am grateful to the Minister for meeting me and for the correspondence we have had, but trying to find some solutions is important.
The Law Commission published one solution that suggested enfranchisement should be possible for all the properties, apart from one or two very critical ones. I always use the example of Carlton House Terrace. Nobody would expect that to be sold off to a bingo hall: it is part of the nation and its palaces. But on the Isles of Scilly it is not really like that. They are pretty standard properties most of which were built in the past 100 years.
The letter from the duchy to me, dated 21 December last year, confirmed that the duchy believed that the status quo can be maintained through
“a ministerial undertaking that will be provided at an appropriate time in the Parliamentary process”.
This was repeated, more or less, in the letter the Minister kindly sent me.
However, none of it says when this would happen, on what grounds, to which properties—and how much. Unless one gets that information, in my experience of dealing with the duchy—I have had several attempts at a Private Member’s Bills, which I do not need to go into now—there is no appeal. This is what you are going to get and you can like it or lump it. At least until this Bill becomes law and reaches Royal Assent,  we can have a debate with the duchy, but there is nothing we can do about it if the residents do not like it.
The other matter that is, frankly, irritating is that the duchy claims special privileges that have been subject to many attempts to cut down, such as voluntary tax payments, free legal advice, treasure trove and many other things. That rather leaves the Isles of Scilly as a rather feudal and medieval structure, which is totally inappropriate today because, at the end of the day, these residents do not have any alternative.
Worse still, as a result of a freedom of information request, Dr John Kirkhope, who is a notary public and an extreme expert on this, discovered that the duchy had had meetings with Ministers about how to phrase this legislation so as not to affect the duchy. Now here we have an unelected and unaccountable body engaged in policy formation when that body is exempt from the legislation that it wants to change. That is all wrong. So the alternative to accepting my amendment, which I hope the Minister will do, although I suspect she will not, is to come up with a solution, before we stop having the ability to debate, which may get the Duchy of Cornwall to accept that all properties it owns should comply with the Act, apart from a small list of very important ones, such as a 300 year-old castle.
Unless we have that, the simplest solution is my amendment, which would include the Duchy of Cornwall within the whole scope of the Bill. It is quite simple, and I cannot see why the Government should object, but they probably will. We shall see what the Minister says, and I look forward to having a meeting with her afterwards.

Lord Mann: My Lords, I shall make a brief contribution to support the amendment moved by the noble Lord, Lord Young of Cookham. I want to make one additional point to add to the problems he clearly outlined for a person in this situation—to quote him unfairly—and the impact that has on them.
I have not been an elected representative for some years, but I took on many cases involving every kind of issue, and I have dealt with these issues. My files were rightly shredded some years ago when I entered this House, so I do not have the precise detail available, only my vague memories. However, I have one distinct memory. There are two types of people who have this kind of problem—those who have solicitors and are used to dealing with solicitors, and those who do not.
Occasionally those who had solicitors would come to me, normally when they were wondering whether there was a way of minimising the costs. I always used to listen for the mention of counsel’s opinion having been suggested: the thousands then started to ring up on the till instantly, because not all solicitors had quite the expertise in such matters as others might have had.
The more concerning cases were the people who came to see me who were not familiar with dealing with solicitors, and who were horrified at the predicament they were in, and the potential costs—not just the costs from the other side, but they costs that they might have to bear. The prospect was one of an unlimited amount of costs, well beyond their comprehension, their budget and their expectations. The psychological impact of that, as well as the risk, would lead to an  incredible feeling of relief if someone like me, in an amateur but persistent way, was prepared to take on their case. That I remember distinctly, in precisely this kind of case. So the common sense that has been suggested is worthy not just of consideration but of enactment, by all sides of the House. I commend the amendment, which is highly appropriate.

Baroness Pinnock: My Lords, I congratulate the noble Lords, Lord Young of Cookham and Lord Berkeley, on exposing and exploring the exceptions to the general rule in the legislation and its application. If we live in a democracy, the rule of law should apply to everyone without heed or hindrance, so I am grateful to both noble Lords for bringing this to the attention of the House. I hope that when the Minister responds she will be able to confirm that the Bill will apply to the Crown Estate and the Duchy of Cornwall, because it ought to.

Lord Khan of Burnley: My Lords, I rise briefly to thank the noble Lord, Lord Young of Cookham, and my noble friend Lord Berkeley for providing the detail, with diligence and eloquence, in calling for what the noble Lord, Lord Young, called a level and equitable playing field for all leaseholders in that situation, particularly in relation to Crown land. I want to press the Minister on getting information from the Government about to what extent Crown and Duchy of Cornwall land would be affected by the amendments, and on providing clarification on the important and pertinent points that both noble Lords raised.

Baroness Scott of Bybrook: My Lords, I will briefly speak to the amendments in my name before turning to the amendments in the names of my noble friend Lord Young of Cookham and the noble Lord, Lord Berkeley. Government Amendment 83 is a clarificatory amendment. Clause 67 outlines that all of Sections 18 to 30P of the Landlord and Tenant Act 1985 bind the Crown, and that the relevant provisions bind the Crown whether or not they relate to Crown land.
As a result, Section 172(1)(a) of the Commonhold and Leasehold Reform Act 2002 will be repealed. Since subsections (4) and (7) of Section 112 of the Building Safety Act 2022 amend the 2002 Act, these subsections are no longer necessary.
I now turn to the amendments in the names of my noble friend Lord Young, and the noble Lord, Lord Berkeley. I thank my noble friend Lord Young for his Amendment 54, which seeks to bind the Crown to the enfranchisement measures in the Bill and to apply those measures to properties subject to escheat. It is a long-established principle that legislation does not bind Crown lands, including the Duchies of Lancaster and Cornwall, unless the Act expressly states so or by necessary implication. Where an Act, or a part of an Act, does not bind the Crown, the Crown can and often does agree to act in accordance with the legislation.
The current position is that most Crown leaseholders enjoy the same lease extension and enfranchisement opportunities as other leaseholders, by virtue of the Crown’s undertaking given to Parliament to act by analogy with the Leasehold Reform Act 1967 and the  Leasehold Reform, Housing and Urban Development Act 1993, which are not directly binding on the Crown. We also expect that the Crown will agree to act by analogy with the Bill before us. The effect will be that most leaseholders of the Crown will have the same opportunity to extend their lease or buy their freehold as any other leaseholder would, except in certain special circumstances set out in an undertaking we expect to be given by the Crown. Therefore, the outcomes the Government want to see can be achieved without legislation, and the amendment is unnecessary.
I would also like to thank my noble friend for raising an important point in his amendment about properties subject to escheat. The Government recognise that when the freehold becomes ownerless, it can cause problems for some of those leaseholders. However, the amendment would not achieve its intended aim because when a property escheats to the Crown the freehold no longer exists, and the Bill is not the appropriate place for a review of the complex law surrounding ownerless land. When a property becomes ownerless the land and buildings escheat to the Crown. If a purchaser is interested, the Crown can sell it so that it goes back into private ownership.
The law in relation to ownerless land and escheat is complex. Following consultation with the Law Commission, the commission flagged ownerless land as a possible law reform project for inclusion in its 14th programme of law reform. As noble Lords can see, if the Law Commission has flagged it as a complex issue needing to be dealt with by it, that is the place where I think it should remain. However, I am happy to talk more to my noble friend; I am particularly interested in the case that he brought forward and am happy to look into it. I therefore hope my noble friend will be content to withdraw his amendment.
Amendment 106, tabled by the noble Lord, Lord Berkeley, seeks to bind the provisions of the Bill to the Duchy of Cornwall where they would not otherwise. I thank the noble Lord for giving advance notice of his intention to table this amendment. I know that he is a tireless campaigner and has a personal interest particularly in this area and the Isles of Scilly.
I am also grateful for the noble Lord’s further Amendment 93A, which would bind the provisions of Part 5 of the Bill to the Crown more broadly. As discussed in relation to Amendment 54, the principle that legislation does not bind the Crown land applies to the Duchy of Cornwall as a Crown body unless the Act expressly states so or by necessary implication.
Most leaseholders of the Crown have the same opportunity to exercise their rights as any other leaseholder, except in special circumstances. The Law Commission recommended that the Crown should remain exempt from statutory enfranchisement rights on the basis that Crown bodies will give an undertaking to act by analogy with the new enfranchisement regime except in special circumstances. The Government are therefore implementing those recommendations.
The Law Commission put forward suggestions for Crown bodies to consider—relating to those areas with special circumstances, including some parts of  the Isles of Scilly—to be included in their future undertaking. We continue to discuss the undertaking with the Crown authorities, and an update will be provided to the House in due course. For most properties on Crown land, we expect the Crown to act by analogy with the Bill.
With regard to Part 5, relating to freehold estates, the Crown is bound to a large extent. Clause 96 makes it clear that the provisions of Part 5 bind the Crown for the home buying and selling measures, and for those aspects of Part 5 where they are required to provide information on request from an estate manager. However, there may be a small number of locations that could be built on now or in future—that is, land owned by His Majesty or other parts of the Crown Estate. In such circumstances, we expect that the Crown will act by analogy with the Bill; in other words, they will ensure that home owners on such estates have access to equivalent rights. In our opinion, it is therefore not necessary to bind the Duchy or, in relation to Part 5, the Crown. That is because, as with Amendment 54, the outcomes that the Government wish can be achieved without statutory provision. I therefore kindly request that the noble Lord not press his amendment, but I am more than happy to speak to him between now and Report.

Lord Berkeley: My Lords, I am grateful to the Minister for a very detailed reply, and I thank her for her interest in this project. I have one question: will we be able to see a draft or a copy of the undertaking from the Crown, which she has mentioned several times, before Report?

Baroness Scott of Bybrook: My answer is that I am not sure, but I will make sure that I let the noble Lord know. If we can do that, obviously we will.

Lord Young of Cookham: My Lords, I am grateful to all noble Lords who have taken part in this short debate. I am grateful to the noble Lord, Lord Mann, for reminding us that it is often a rather one-sided battle, with leaseholders confronted by freeholders with massive resources. I am grateful to the noble Baroness, Lady Pinnock, for her support for my amendment.
As far as the noble Lord, Lord Berkeley, is concerned, I have happy memories of replying when I was on the Front Bench to his Duchy of Cornwall Bill. He spoke at somewhat greater length on that occasion about the need for major reform of the Duchy.
On the specific issue that I raised, I am not expecting any legislative change because my noble friend said, quite rightly, that the Crown is not bound by legislation, but she said on several occasions that the Crown would act by analogy with the terms of the leasehold Acts. I think that gives me what I want, so long as it covers the Crown acting as freeholder as well as the Crown acting as owner of land in escheat. At the moment, that is not the case. At the end of my remarks, I asked whether my noble friend would be good enough to get the necessary assurance from the Crown Estate and the Treasury that they would deal with escheat applications in the same way as applications for where they are the freeholder.
I am grateful to my noble friend for her sympathetic reply. I think I can build on the undertaking that she has given to make some progress. I do not want to wait until the Law Commission has gone round the course all over again, whenever that may be. The leases that I referred to are coming towards the end of their time, and each delay adds to the potential cost for the leaseholders.
I hope we can make progress without waiting for a Law Commission report. It is simply a case of the Crown acting equitably and doing exactly what my noble friend has said: acting by analogy and delivering the laws that have been passed by Parliament. On that basis, I am happy to withdraw the amendment at this stage.
Amendment 54 withdrawn.
House resumed. Committee to begin again not before 8.20 pm.

Childcare Entitlements
 - Statement

Baroness Barran: My Lords, with the leave of the House, I shall now repeat a Statement made yesterday in another place by the Parliamentary Under-Secretary of State for Education. The Statement is as follows:
“With permission, Mr Speaker, I will make a Statement on the successful first stage of the largest ever expansion of childcare in England’s history being made by this Government.
The Government have a strong track record of supporting parents with the cost of childcare, supporting disadvantaged children and ensuring that childcare is of high quality, with 96% of early years settings rated as good or outstanding by Ofsted. In 2010 we extended the three and four year-old entitlement, commonly taken as 15 hours a week for 38 weeks of the year; in 2013 we introduced 15 hours of free early education a week for disadvantaged two year-olds; in 2017 the three and four year-old entitlement was doubled to 30 hours per week for working parents; and in March 2023, recognising that childcare is one of the biggest costs facing working families today, my right honourable friend the Chancellor announced the biggest investment in childcare by a UK Government in history, so that by September 2025 working parents will be able to access 30 hours of free childcare a week from when their children are nine months old until they start school.
By the time this expansion is complete, parents using the full 30 hours can expect to save an average of £6,900 a year, a hugely significant saving for their family finances. We are staggering the expansion to ensure that there are the staff and places available to meet parental demand, and this month marked the first stage of the rollout, with eligible working parents now able to receive 15 hours of government-funded childcare for their two year-olds for the first time. Last month my right honourable friend the Secretary of State for Education informed the House that we expected 150,000 children to benefit from the expansion from  the beginning of this month. As we set out in our official statistical report, 195,355 parents were already benefiting from this on 17 April, and we have subsequently broken the 200,000 mark. We will publish further official statistical reports in due course.
As Members will know, the system involves parents applying for a code that they take to a provider to be validated in order to obtain a place. The first phase of the rollout is showing a trajectory similar to that of our previous expansion of childcare, in 2017. On 5 September 2017, 71% of codes had been validated. As of 17 April this year, 79% had been validated by providers, and we have broken 81% as of this week. With every rollout, some eligibility codes go unused for a variety of reasons, such as parents changing their minds about formal childcare, or being issued with a code automatically even though they did not need one. In the case of our well-established offer for three and four year-olds, about 12% of codes have not been validated, but as with previous rollouts, we expect the number of children benefiting from this new entitlement—and the number of codes validated—to grow in the coming weeks and months.
As was the case in 2017, no local authorities are reporting that they do not have enough places to meet demand. I pay tribute to early years providers, local authorities, membership bodies and other key stakeholders who have worked closely with us to ensure that the first phase of the rollout was successful and parents could access places, and we will continue to work closely with them for the next phases of the rollout. The first of those will begin in September, but parents will be able to start applying for 15 hours of childcare for their nine month-olds from 12 May, ready to receive these in September. I am also delighted to announce that parents on parental leave, and those who are starting a new job in September, will be able to apply for childcare places from 12 May, instead of having to wait until 31 days before their first day of work, as has been the case until now.
Delivering such a large expansion requires more staff and more childcare places. We estimate that we will need 15,000 more places and 9,000 more staff by September 2024, and that for September 2025, which will see the largest phase of the rollout, a further 70,000 places and 31,000 staff will be needed. Last year the number of childcare places increased by about 15,000, and the number of staff by about 13,000, even before the rollout began and before the significant steps that the Government are taking, beginning with rates, to increase capacity in the sector.
The Institute for Fiscal Studies has independently confirmed that funding for the new two year-old entitlement is significantly higher than average parent-paid fees. According to the Government’s provider pulse survey published last week, the largest barrier identified by the sector—by 45% of respondents—to expansion of its provision was future funding certainty, a message that I have heard clearly from the many providers I have visited in recent months. In his 2024 Budget, the Chancellor committed to ensuring that funding rates for all entitlements would increase by the measure used last year in the 2025-26 and 2026-27 financial years. That estimated £500 million of additional funding over those two years will provide a level of certainty  that we are confident will help to unlock tens of millions of pounds in private sector investment, ensure that rates keep up with provider cost pressures, and give providers a greater opportunity to increase staff pay.
This year, to support recruitment to the sector, we launched a £6.5 million recruitment campaign titled “Do something BIG. Work with small children”, and thousands of people are visiting the campaign website every week to find out more about the great early years and childcare careers that are available. In January we introduced changes to the early years foundation stage to give providers greater flexibilities to attract and retain staff, and yesterday we launched a technical consultation setting out the department’s proposals for how a new experience-based route could work for early years staff who have relevant experience from other sectors but do not have the full and relevant qualifications that we require.
Due to the falling birth rate over recent years, some primary schools have space that they are no longer using, and some have closed entirely. In order to support our expansion of childcare, we have launched a pilot to explore how some of the unused school space could be repurposed to enable childcare settings to offer more places. If the pilot is a success, the Government will roll that out more widely.
Our progress in delivering this transformative expansion in early education and childcare underscores this Government’s unwavering dedication to empowering families, supporting the childcare sector, and building a prosperous future. I commend this Statement to the House”.
My Lords, that concludes the Statement.

Baroness Twycross: My Lords, I welcome the opportunity for us to discuss the Statement made yesterday in the other place. I thank the Minister for repeating it today in your Lordships’ House. Noble Lords present are probably united in thinking that the Government’s aspiration in expanding free childcare is welcome. However, unfortunately, it appears that currently only the Government believe that their flagship policy is on track.
My first question to the Minister is: why are Ministers proactively bringing a Statement to Parliament to say that everything is on track, when the Government’s own auditors are now saying otherwise, without the Government acknowledging that there are issues? When I suggested yesterday at Oral Questions that the policy was in trouble, the Minister stated that
“it is a huge success
I woke up to headlines that indicated that I was not far off. In light of the report published today by the National Audit Office, will the Minister accept that the policy is, at the very least, at risk of not going to plan? Even the Telegraph is reporting that parents are facing worse childcare under this Government’s childcare expansion.
Are the Government still guaranteeing that every eligible child has a spot now, that every eligible child will have a spot later this year, and that every eligible  child will have a spot in September next year? Are parents getting the savings that they have been promised? Why have the Government repeatedly dismissed genuine concerns about the rollout of the plan, when the problems are so clear and stakeholders across the board are highlighting the same problems?
Even the DfE has the expansion as its top programme risk, with risks including insufficient places, operational infrastructure not being ready, insufficient parental demand and an unstable market. When will the Government make a formal response to the NAO’s report? Furthermore, could the Minister confirm that the DfE has itself
“assessed its confidence in meeting milestones beyond April 2024 as ‘problematic’”?
Does she agree with the NAO that the extension does not “achieve its primary aim” or demonstrate “value for money”? How did the DfE think it was appropriate to set dates for expansion without engaging with the sector or understanding local authorities’ and providers’ capacity? Will the Government act on the NAO’s recommendations about continuously reviewing the achievability of the 2025 milestones and will they now publish interim performance thresholds?
I return to the point I made to the Minister yesterday: the DfE’s own pulse survey from last week found that 45% of childcare and early years providers said it was unlikely that they would increase the number of places they offer to under-threes as a result of the Government’s childcare expansion. The NAO estimates there is in fact a net reduction in places—albeit just a 1% reduction —since 2018, but this is at a point at which we need a significant increase in places. Could the Minister outline what the DfE’s plan is if it accepts that it will struggle to reverse this trend, if it finds that the providers simply cannot afford to offer free places, or the one in three nursery and pre-school providers that the Early Years Alliance says are at risk of closure simply do not survive? This would potentially put 184,000 places in jeopardy. How does the Minister explain the disparity between what the Government say and what the sector, parents and councils, and now the NAO, are saying?
The Statement repeated today states confidently that
“no local authorities are reporting that they do not have”
sufficient “places to meet demand”. This is very different from the National Audit Office view that only 9% of areas are confident that they will have enough places. To clarify this point, I contacted the Local Government Association, which told me that councils have reported greater concerns about the next stages of the expansion, where it will extend to children and families who would not previously have accessed childcare to this extent. It is deeply concerned about provision for families that require a different range of childcare options, such as outside traditional hours, or families for children with SEND.
The Coram Family and Childcare survey found that England has seen reductions in the availability of childcare in all categories. Worryingly, the greatest reductions have been in childcare for disabled children, which I understand is now at 6% sufficiency. Can the Minister say why this is the case and what the Government will be doing to remedy this? Local authorities are also  concerned about recruitment, particularly because of the higher ratios required for under-twos. They are concerned about the lack of sufficient level 3 qualified staff in the sector. Is the Minister confident that recruitment is on track?
There is broad consensus on the need for a decent childcare and early years offer, including increasing free hours. It is a shared ambition across political parties to have an improved system that works for parents and carers and delivers the best start in life for children. Labour genuinely wants better childcare and early years provision. We have commissioned a review by Sir David Bell to assess a way forward. We want a well-planned, well-designed system that delivers for children and improves the offer to parents.
I am confident that the Minister also wants a system that works, but the first step in this instance to getting that has to be for the Government to accept that there are problems, and work to get this scheme back on track. I look forward to her response as to how, in light of the serious risks facing this flagship government policy, the promised expansion in free childcare and early years provision will be delivered.

Lord Storey: My Lords, I thank the Minister for her detailed Statement. I would guess that all of us aspire to the aspirations that she espoused on childcare. The issues that we are concerned about—and they concern a number of people—are around whether this can be delivered. I listened to the Statement with great care and the words that were missing were not about numbers but about quality. I have always believed, as my party always has, that it is not just about providing childcare. It has to be quality childcare—and I did not get a sense of that in the Minister’s Statement. There are a number of issues. She mentioned pay, quite rightly, but it is about training as well.
As we have heard, the National Audit Office has raised concerns that plans to extend free nursery provision could compromise—again, that word—the quality of childcare as the sector expands to meet demand. The NAO cautioned that hiring inexperienced staff and a lower supervision ratio for two year-olds could undermine childcare quality. There are also worries about whether inspections by Ofsted would identify issues early enough. The NAO has highlighted concerns about the Department for Education’s confidence in delivering required places, with only 34% of local authorities expecting to have enough places by this September. On the other hand, the Minister has painted an extremely positive picture of rollout. It will be interesting to see who is right.
This ministerial Statement did not mention or address the up-and-coming report and findings, which have been described as utterly damning by the early years sector. The Government must address the findings of this report urgently. The report concludes that there is a risk posed by
“the lack of contingency and flexibility”
in the Government’s “fixed, ambitious timetable”. It is therefore important that clarity and reassurance is provided quickly on how they will address the report’s findings. Families across the country will struggle to plan their arrangements if certainty over the next phase of the rollout is not provided.
Only 17% of nursery managers said that they could offer the extended entitlement, due to the crisis of recruitment and retention. What will the Government do to address this recruitment and retention issue?
Finally, I was interested to hear about the campaign to use unused schools. The Government want to set up what I think they call “in-home nurseries” to create some of the 85,000 places needed. How many schools will be used in the pilot scheme that the Minister told us about? If the scheme is successful, how many schools do they think they will be able to finally use?

Baroness Barran: I thank both noble Lords for their questions and for sharing, as we all do across this House, the ambition for all children, as we know the importance of a great start in life.
I will start, if I may, where the noble Baroness did in relation to the National Audit Office report and her question, which was echoed by the noble Lord, about when we will respond to the National Audit Office formally. I can give the House some sense of that today but, in terms of timing, we will also be giving evidence on this subject to the Public Accounts Committee on 8 May—so our plan is to respond to both the NAO report and the Public Accounts Committee in the normal way.
On the NAO report itself, I absolutely understand why both noble Lords rightly raise its challenging aspects, but it is also worth noting some of the more positive aspects. The NAO report identifies that the programme has been fundamentally successful in the rollout so far, meeting and actually surpassing the April 2024 objective. It confirms that the trajectory and take-up of this expansion in entitlement is the same as previous expansions. It also notes that it expects that the number of places being taken up will continue to grow and notes the phased introduction of the new entitlement.
On the recommendations, the noble Baroness opposite raised the achievability of the September 2025 milestone, whether the department would be setting interim performance thresholds and how we would respond with corrective action, if needed. Of course, we continually review the deliverability of the programme. We have a local authority delivery team; we have our insight unit, which analyses the data; and we have pulse surveys, stakeholder groups and provider groups, so we are really well connected into the sector. We have set a series of milestones that cover local authority readiness, sufficiency and workforce and, by the end of June, we will set regularly spaced performance thresholds. We will use those to assess the growth of capacity places and the workforce. Of course, those can and should be updated as needed, as we get live data in.
By the end of June this year, we will agree a set of staged corrective actions, if those actions are needed. To support that, we will also use our data better. We regularly update both our supply and demand modelling, and we share that directly with local authorities. We have a set of KPIs for the programme, which we monitor regularly.
The noble Lord, Lord Storey, raised a point about the quality of staff and the risk that, with less experienced staff, the quality might suffer. We do not really accept that. Back in 2021 we made major reforms in early  education, which the noble Lord will remember. These were designed to improve outcomes for all children, but particularly for disadvantaged children and children with special educational needs. In October last year we published the evaluation report of those reforms, which showed that practitioners have really benefited.
As we continue with the rollout, we will be looking at the availability and quality of places for children from disadvantaged backgrounds. Similarly, for those with special educational needs and disabilities, we will be looking at what the impact is if we see new providers and staff entering the market.
We have also commissioned and funded the children of the 2020s study, which collects longitudinal data on elements that influence cognitive and social and emotional development during early childhood. Obviously, we will share that data.
Deliverability was a key part of both noble Lords’ questions, and the workforce is a critical part of that. It is fair to say that, where we are further away from a delivery deadline, it is not unreasonable that confidence in readiness might be lower. Looking at where we were in November in our pulse survey and what providers were saying about their readiness for April, 65% of them said that they were ready. By the March survey, one month ahead of the extension, that figure had risen by 16 percentage points to 81%. That is just normal.
It is also important to note that all types of providers that took part in our pulse survey have increased their capacity in the last year by over 20% for group-based and school-based providers. The figure is rather more for childminders although, as your Lordships know, they represent a smaller part of the market. On applications, for group-based and school-based providers, the number of applicants to vacancies is now on average five to one, which is a really healthy and promising indicator for the future.
The noble Lord also talked about retention, which is clearly critical. It will be important to improve retention in order to reach our objectives. The additional funding, the visibility of funding and the ability of providers to plan will make recruitment and opportunities in this sector more attractive, but there is work to do to deliver that.
The noble Lord also asked about the number of schools. We are working in a small number of areas with those schools to build a template of what might work. We will test that and, if it is successful, roll it out.
The noble Baroness, Lady Twycross, asked about wraparound care outside formal hours. In the Spring Budget last year, we announced £289 million to support the expansion of wraparound childcare for primary school-aged children.
Finally, the noble Baroness rightly raised concerns over this programme delivering for children with special educational needs. She will remember from my remarks yesterday that we are conducting a review of how the special educational needs inclusion fund works to make sure that it is as good as it can be.
We have chosen a phased approach to make sure that we learn as we go along with the implementation of this expansion, but we are doing everything we can to make sure that it is a success.

Baroness Andrews: My Lords, the Minister began by saying that this is the biggest expansion in childcare, and she is right; we share those ambitions. But it is because it is the biggest expansion we have experienced in childcare that the NAO report is so worrying.
Among the things the report says, in many different ways, is the difficulty the DfE has in getting the right data to plan properly. While I have listened to what the Minister said about how the DfE will respond, with better benchmarks and so on, I find it very difficult to know how it will do that given the quality of data. I will quote from page 33 of the report:
“Given limited engagement, DfE does not know the market’s willingness and capacity to increase places … There remain uncertainties over whether the sector can expand”.
If you take that set of uncertainties, it becomes clearer why this is the DfE’s top risk. The risks have already been enunciated by my noble friends. They include risks to places, operational infrastructure, insufficient parent demand and an unstable market. That is an extraordinary range of risks. The risk register must be glowing red. Can the Minister share the risk register with us so that we can see where the DfE sees the greatest risks coming from and what the responses will be? If she cannot do that, maybe she can explain how the risks identified are being addressed on a systematic basis.
I turn to the conclusion of the NAO report. It says that the DfE
“has assessed its confidence in meeting milestones beyond April 2024 as ‘problematic’. It must now use available data to understand when it needs to intervene”.
But, as I said, if the quality of data and access to data are so limited, how will the department do that?
The conclusion ends:
“In extending entitlements, the government’s primary aim is to encourage more parents into work. Even if DfE successfully navigates the significant uncertainties”,
which are documented throughout the report,
“it remains unclear whether the extension will achieve its primary aim, represent value for money and not negatively impact DfE’s wider priorities relating to quality and closing the disadvantaged attainment gap”.
Each of those phrases carries tremendous weight, particularly the last one about the attainment gap. How are the Government going to respond credibly to that set of very authoritative statements?
Finally, I have a general point. The NAO report is a reality check. I have every sympathy with the Minister and with the DfE in trying to deliver this, because it is a huge challenge. One of the reasons for that is that it is an object lesson in how not to make policy. The Government did not consult the providers early enough or get an understanding of what the market was like on the ground. They did not address the historical underfunding, as we discussed when we debated this last November, which was built into the system from 2013 onwards, and did not understand the lack of resilience in the sector. The Minister talked about retention and recruitment but, in fact, between 2018 and 2023 an increase of only 5% was achieved in recruitment and retention. The target for the coming years is much higher.
This is a very serious report, and it is going to demand from the department a very serious and credible reply. The real risks are the risks to parents, who want and need to be able to count on this service, and to children, who need quality provision, which they are not likely to get unless investment is properly guaranteed and targeted.

Baroness Barran: I have to say that I did not agree with everything that the noble Baroness asserted. To start with the risk register, it is not glowing red, but it is of course a priority risk for the department. The noble Baroness understands this extremely well from her previous experience. We are doubling the commitment in this area financially: we will spend £8 billion a year once this rollout is complete, from £4 billion today. That is a massive increase, and it is a real challenge in a market with a number of small providers and with the way in which, rightly, we work through local authorities and providers. So it would be irresponsible—and I think that the noble Baroness would be criticising the Government—if it was not a significant risk for the department. But that means that it gets a great deal of focus, and there are very detailed plans to support it.
As for consulting the sector, I slightly take exception to what the noble Baroness said. The department works very closely with the sector, providers, parents and local authorities, and it is crucial that we do, because we are committed to getting this right.
As for the willingness of providers, and the point that the noble Baroness picked from the report about our understanding of willingness and capacity, as I pointed out earlier, capacity for all types of provider rose by over 20% last year. That is very significant, as I am sure that the noble Baroness agrees. On the point about willingness, almost 40% of group-based providers, 33% of school-based providers and 42% of child minders said that they would be more likely to offer places to children under three, given this expansion. About half of them—it is slightly different, but I shall not bore the House with all the numbers—said that those would be additional places, so they would not be substituting an older child with a younger child.
Where I absolutely agree with the noble Baroness is that this is a very serious report. We take it very seriously, and we will respond in full.

Baroness Bennett of Manor Castle: My Lords, like every other speaker, I have read with concern the National Audit Office report, which talks about the lack of qualified staff and suitable space, which could have an impact on the quality of provision. I share the concerns about qualified staff, but we have not had much discussion about the suitable space side of the issue. The Minister may have to write to me later, but it would be interesting to know how many of these are actually new facilities, how many facilities are closing— we are still hearing reports of facilities closing—and what the comparative quality of the space of the new provision is.
One thing that I was thinking about, which is something that the Minister and I have discussed before, is access to green space. We are increasingly understanding how terribly important that is for the health and well-being of everybody, but particularly  young children. What percentage of the new provision is in places that have access to space? Is expanding the number of places reducing the amount of access to green space per child? What information do the Government have about the quality of the spaces of these new provisions? That is something that the National Audit Office has brought to our attention, and it really deserves more focus.

Baroness Barran: On building capacity, the department has awarded £100 million to local authorities to help expand capacity. On the quality of space, as the noble Baroness knows, early years settings are regulated by Ofsted. It has very clear standards that they have to meet, and we expect them to meet them.

Baroness Anderson of Stoke-on-Trent: My Lords, the NAO report suggests that many of the issues and challenges that we have heard about this evening would have been mitigated if the Government had not cancelled the £35 million pilot. I wonder whether the Minister can tell us why we cancelled the pilot and what assessment has been made for phases 2 and 3 of the scheme, having not done it.

Baroness Barran: The noble Baroness hits on perhaps the one thing on which we do not accept the recommendation from the National Audit Office. We made a decision not to run the pilot because we did not think that it would contribute meaningfully to readiness or provide value for money. The key decision we took was that this would be a phased rollout, so that local authorities, providers and parents all had time to adapt. We are continuing to test and review delivery on an ongoing basis; we are piloting different interventions to support workforce expansion through financial incentives in 20 local authorities. What we found from the evaluation of the 2017 rollout was that providers were willing to offer more hours, and were able to offer sufficient hours, and that there were no adverse impacts on other provision. We also found that providers were really flexible. We are very fortunate to have providers that are so focused on outcomes for parents and, of course, for their children.
Sitting suspended.

Leasehold and Freehold Reform Bill
 - Committee (2nd Day) (Continued)

Amendment 55

Baroness Taylor of Stevenage: Moved by Baroness Taylor of Stevenage
55: After Clause 45, insert the following new Clause—“Abolition of forfeiture of a long lease(1) This section applies to any right of forfeiture or re-entry in relation to a dwelling held on a long lease which arises either—(a) under the terms of that lease, or(b) under or in consequence of section 146(1) of the Law of Property Act 1925.(2) The rights referred to in subsection (1) are abolished.(3) In this section—  “dwelling” means a building or part of a building occupied or intended to be occupied as a separate dwelling, together with any yard, garden, or outhouses and appurtenances belonging to it or usually enjoyed with it;“lease” means a lease at law or in equity and includes a sub-lease, but does not include a mortgage term;“long lease” has the meaning given by sections 76 and 77 of the Commonhold and Leasehold Reform Act 2002.”Member’s explanatory statementThis new Clause would abolish the right of forfeiture in relation to residential long leases in instances where the leaseholder is in breach of covenant.

Baroness Taylor of Stevenage: My Lords, our amendments in this group go to the heart of one of the current serious injustices relating to leasehold: that of forfeiture. It is quite simply anachronistic, wholly disproportionate and complete imbalance in the relationship between leaseholders and landlords. In some circumstances, a debt of a few hundred pounds can trigger the ability to take possession of the property. What my honourable friend the shadow Minister for Housing in the other place called
“the chilling effect that results from its mere existence
puts landlords in a nearly unassailable position of strength in disputes with leaseholders, as I hope I illustrated in my earlier quote from an elderly leaseholder. Unfortunately, the threat of forfeiture is too often used routinely by landlords as a first resort when seeking to recover alleged arrears in payments from leaseholders, and so often invoked to deter leaseholders from disputing any unreasonable costs and defending claims.
Our first amendment is reasonably straightforward: it is basically a matter of disproportionality and consistency. A real estate solicitor summed it up very neatly in his evidence to the Commons committee. He said:
“It is extremely welcome to see the government’s proposed clause 59 and amendment NC4 relating to the abolition of remedies relating to rentcharges. It is also very welcome to see the proposed amendment NC1 which would abolish forfeiture in long residential leases, which is long-overdue. However, there is a key point that does not seem to be addressed: forfeiture in relation to rentcharges. Rentcharge deeds often reserve a right of forfeiture for non-payment which operates in the same manner as a forfeiture clause in a lease. The Committee clearly recognises that the expropriation of somebody’s property as a remedy for breaches of a lease on an extra-judicial basis is entirely inappropriate and unfair. Therefore, it should equally concern the Committee that the same remedy is available in many cases in relation to rentcharges. Therefore, I would ask that the Committee either add to proposed amendment NC1 or propose an additional clause to abolish any right of forfeiture under a rentcharge”.
This amendment would ensure that leaseholders are in no worse a position than anyone else subject to a challenge to ownership would come under. So, while we accept the principle that legal remedies should be available, we do not believe that forfeiture provides adequately for leaseholders to challenge or defend themselves from repossession.
Our other amendments are a bit more complicated on paper, as they would replace Clause 111, which currently provides remedies for arrears of rent charges where the rent charge remains unpaid for a period of 40 days, one of which is the ability for a rent charge  owner to take possession of a freehold property in instances where a freehold homeowner fails to pay a rent charge. But in essence it is very simple. It would simply mean that debts have to be sued for, as you would for any other kind of debt. In short, the 1925 Act provides for the power to seize freehold houses for non-payment of a rent charge, even if the arrears are merely a few pounds, and allows the rent charge holder to retain possession or render it, in effect, worthless by means of maintaining a 99-year lease over it.
In our view, the remedies provided in the 1925 Act are a wholly disproportionate and draconian legacy of Victorian-era property law. The 1977 Act prohibited the creation of new rent charges and provided for existing rent charges to be abolished in 2037, but 13 years from now is still a long time away and any lease granted prior to the abolition will remain in force. Rent charges are therefore an area of law in respect of which legislative reform is long overdue and the need to protect rent payers from what amounts essentially to a particularly severe form of freehold forfeiture as a result of the relevant remedies provided by the 1925 Act is pressing.
We understand that the Minister in the Commons called this argument “reasonable” and implied that it could be revisited if the Government were able to consider the potential consequences of such a change, so I press the Minister that, if we are asked to withdraw our amendment today, she will at least consider whether the Government can deliver the effect we all want to see via a government amendment. We feel very strongly about this issue and I hope it will not be necessary to continue to press this point through to Report. I beg to move.

Lord Truscott: My Lords, I wish to address the issue of forfeiture and Amendment 55 in the name of the noble Baronesses, Lady Taylor of Stevenage and Lady Pinnock, and Amendment 95 in the name of the noble Baroness, Lady Taylor. I absolutely agree that leaseholders should not be subject to forfeiture in the case of a debt of a few hundred pounds or a temporary breach of covenant. Indebtedness can be dealt with by the county court and bailiffs. For that reason, I support Amendment 95 in the name of the noble Baroness, Lady Taylor of Stevenage. However— I know this may be controversial with some noble Lords—I am concerned that a blanket ban on forfeiture would remove an effective deterrent preventing some leaseholders persistently and wilfully breaching their leases by, for example, anti-social behaviour.
Let me give three practical examples I have come across in my years as a leaseholder. The first concerns a landlord who was letting out his flat on Airbnb, in breach of his lease. He knew he could make more money doing this than letting it on a long lease. As noble Lords know, Airbnb can cause a serious nuisance in blocks of permanent residents, due to excessive noise, wear and tear and lack of security impacting on quiet enjoyment. The landlord/leaseholder in question stopped only when threatened with forfeiture for breaching the lease.
The second involved a leaseholder putting a hot tub under a neighbour’s window, in clear breach of the lease, as only patio furniture was allowed to be displayed  on the terrace, and threatening their quiet enjoyment. When challenged, their approach was dumb insolence. “What are you going to do about it?” was their approach. The threat of forfeiture ensured its removal.
The third example is more personal. My wife was attacked in our own garden by a neighbour’s tenant’s large dog, which was in a flat in breach of the lease. The gardens are open, with no boundaries, so dogs wandering around under no control are a problem. Let me be clear, I am a dog lover—I had two dogs as a child—but I am also conscious that there has been a massive increase in dog attacks in recent years. Official NHS figures reveal that, in the year to March 2023, there were 9,277 hospital admissions in which the patient had been bitten or struck by a dog. The number of people killed by dogs has also risen dramatically. In the last 20 years or so, the number of fatal dog bites has averaged about three per year; however, by 2022, it had risen to 10 fatalities and is still climbing. These cases are horrific and worrying.
Many blame the owners, not the dogs. Too many owners seem unwilling or unable to control their dogs and this behaviour is unfortunately widespread, as I have witnessed myself on a number of occasions. The dog in our block stayed, but when the leaseholder/landlord tried to introduce another tenant with another large dog, after the first attack, again in breach of the lease, it was only the threat of forfeiture that resolved the situation. Dogs may be appropriate in many surroundings, but in others they are excluded in leases for a reason.
Thus there are occasions when the mere threat of forfeiture, rarely used in practice, is useful to ensure compliance with lease obligations. Other legal routes can be extremely costly, lengthy and ineffective. So I ask the supporters of a complete ban on forfeiture how they propose to enforce compliance with leases and prevent breaches in the future if this proposal is carried.

Baroness Pinnock: My Lords, I have added my name to Amendment 55, in the name of the noble Baroness, Lady Taylor of Stevenage, because it seems to me, as it does to the noble Baroness, that this is one of the clear injustices in the current leaseholder-freeholder relationship. The amendment is rightly restricted to the abolition of forfeiture of a long lease.
I thought it was straightforward until I heard the noble Lord, Lord Truscott, outline some of the issues that he believed could be addressed only through forfeiture. I was surprised that we have to go to such draconian ends to deal with a fairly straightforward neighbour dispute.

Lord Truscott: The problem is that, if you try to enforce a lease, what is your route? The only other route would be to go to the High Court, and that would be a very lengthy process. I am saying that the threat of forfeiture is often enough for people to see sense. I have never come across a case in which people have actually gone through the whole process of forfeiture.

Baroness Pinnock: I thank the noble Lord for expanding on that.
It would be interesting to hear from the Minister whether there are any statistics regarding freeholders using the forfeiture system to address not the issues that are normally referenced—failure to pay ground rent or an accumulation of three years or more of debt—but breaches of the lease. It would be helpful to understand all that.
As the noble Baroness, Lady Taylor, has said, if the payment in lieu is more than £350, or is outstanding for more than three years, the freeholder is entitled to claim repossession—and then all the equity in the property is lost, of course. When I first looked at this, I could not see how it could possibly be right. I remember that, at Second Reading—I was just trying to find it in Hansard—the Minister said that the Government were considering bringing forward an amendment to address this issue. It is unfortunate that that has not been forthcoming in the time that has elapsed between Second Reading and Committee. Perhaps in her reply, the Minister can say whether the Government intend to bring an amendment on Report. It would help us resolve what is, on the face of it, a complete injustice. It would be sufficient if the Minister said that that is going to happen, and maybe those of us who have signed the amendments could have a meeting with her to discuss it, if necessary.

Lord Bailey of Paddington: I support this amendment. Although in his intervention the noble Lord talked about how to control peoples’ behaviour when they have misbehaved and breached their lease, it should be taken into account that the threat of forfeiture is held over leaseholders, in a very draconian fashion, for the smallest infraction. More importantly, it is used to enforce such things as the flagrant and inequitable boosting of service charges. If you are in dispute in this situation, you are told you will end up having to pay court fees. You are told that, if you do not pay—

Lord Truscott: To clarify, I said specifically that people should not have their leases forfeited as a result of rent arrears. The threat of forfeiture can ensure that lease compliance occurs. If you remove the threat of forfeiture, how do you achieve compliance with other terms of the lease?

Lord Bailey of Paddington: There are ways and means within our court system to reclaim any money that may be owed to the freeholder for service charges, ground rent and so on. Let us be very clear that forfeiture is used as a tool to threaten, bully and cajole leaseholders into compliance. When your freeholder invents a new reason as to why you have to pay more, you are warned that, if you do not do so, you could be taken to court for forfeiture. You are then told by the system that, if you do pay more, it is seen as agreeing with the bill that was presented to you.

Lord Truscott: I am not talking about freeholders taking action against other leaseholders; I am talking about how one leaseholder may want to enforce a lease against another leaseholder. In that case, you are saying that they would have to go to the High Court to enforce the lease, and that is a very lengthy and protracted process. I am not talking about  the relationship with the freeholder or indebtedness; I am talking about how to enforce the lease between leaseholders, and I gave the example of Airbnb using a block of flats.

Lord Bailey of Paddington: It would be extraordinary, though possible, if fellow leaseholders could invoke forfeiture but the freeholder could not. That would be incredible, and I am sure it would have all its own problems.
The point remains that, if you keep some kind of forfeiture, freeholders will want to keep hold of that power, because it is exactly that: an unfettered, threatening power, which leaseholders speak about as though it is mythical, like a dragon that will burn you if you stand up to the freeholder. Words fail me when I try to describe how forfeiture must go. We have had many conversations in which the word “feudal” has been bandied about. This is one occasion where it has real meaning. Forfeiture should and must go.

Lord Kennedy of Southwark: My Lords, first, I declare a number of interests to the House. I am a vice-president of the Local Government Association, the chair of the Heart of Medway Housing Association, a non-executive director at MHS Homes Group, and a leaseholder.
Before the Bill arrived, it promised a lot. As it stands it is doing much less than that, so in a sense it is a fairly timid Bill. However, some of the things it does are actually very useful. I support the amendment of my noble friend Lady Taylor of Stevenage on forfeiture; it needs to be abolished. I have also listened to the noble Lords, Lord Truscott and Lord Bailey, and both make very valid points. The Government should listen and bring an amendment that addresses the points they made. That is not impossible, as far as I can see; it is absolutely right that there should be some remedy to deal with this.
Equally, we cannot have people being bullied into paying the service charge or ground rent; that it totally wrong. There must be remedies to deal with those things: if someone is owed money, they should get it, but forfeiture—losing their entire asset—is ridiculous. I hope that, on both points, which are extremely valid, the Government say to us that they hear what people are saying and that they will look at this issue and come back with amendments.
I want to ensure that people can enjoy their property without being annoyed by parties, noise and other trouble, and that there is a remedy to enforce that if need be. Equally, if someone has a freeholder coming after them, they could actually lose their property, or, worse, the freeholder could use their service charge or ground rent to take them to court. We need to deal with all these things.
I hope that, at the end of what will probably be a fairly short debate, the Government will recognise that there is a problem here and will help us by bringing back an amendment to deal with these issues; or, as the noble Baroness, Lady Pinnock, said, that they will get people together around the table to try to sort this out. The Bill is not doing much, but this is something very positive it could do.

Baroness Scott of Bybrook: My Lords, I thank the noble Baroness, Lady Taylor, for her amendments in this group, which seek to remove forfeiture from the leasehold and freehold estate.
Amendment 55 seeks to address one of the ways in which leasehold law is tilted in favour of landlords. I know that noble Lords from all sides of the House are sympathetic to this intention, as are Members from the other place, where this same clause has already been debated.
Forfeiture is widely recognised as a draconian and unfair measure which is open to abuse. The main objection to the current law is that, should the landlord forfeit the lease and go on to sell the property, this allows them to make a large windfall gain at the expense of the leaseholder, who loses everything. Abolishing forfeiture would reduce the risk to the leaseholder of losing their home and would prevent abuses.
Abolishing forfeiture without replacing it with an alternative enforcement mechanism would mean that landlords would have recourse only to ordinary civil debt recovery and injunction proceedings, which, as we have heard, can be lengthy and are not always effective. In the absence of forfeiture or an alternative, there is a danger that a greater number of leaseholders may refuse to pay their fair share of the cost of maintaining their block or estate, and we have to take this all into account.
Noble Lords asked how many cases there are. We do not have the exact number, but stakeholders give us estimates of between 90 and 120 cases per year. It is not a big issue, but it is a very important one for those people.

Lord Bailey of Paddington: The number of cases will not indicate the use of forfeiture, because forfeiture is wielded as a fiery dragon. Leaseholders speak about it as the dog that bites. The number of cases may be small, but I would argue that the use of forfeiture is probably far greater.

Baroness Scott of Bybrook: I have said that it is not the right way of doing it, and we want a different way. That is exactly what the Government are looking at.
We have to be clear that the upkeep and safety of buildings is also paramount. Landlords, be they third parties or resident management companies, need effective mechanisms for securing prompt payment to ensure that those properties are insured and maintained in the interests of everybody else in the block.
We recognise that there is the potential for significant inequity at hand where a landlord stands to gain a windfall when a lease is forfeited. However, I reassure the noble Baroness, Lady Taylor, and the Committee that the Government have been listening to calls for us to act. The Government continue to work through the detail and we will report to the House shortly with more information. In the meantime, I welcome members of the Committee sharing their views on this matter, which the Government will reflect on when formulating their position.
In addition, I thank the noble Baroness, Lady Taylor, for Amendment 95, which seeks to abolish Section 121 of the Law of Property Act 1925 in respect of all rent charges. Let me be clear: the Government are sympathetic to the issue raised by the noble Baroness. We recognise that forfeiture is an extreme measure and should be used only as a last resort. Any changes will require careful consideration of the rights and responsibilities of all interested parties.
Clause 111 already seeks to abolish forfeiture for income-supporting rent charges, which are still in existence, even though the creation of new charges of this nature has been banned since 1977. However, some types of rent charges may still be created, including estate rent charges, which are used for the provision of services on managed estates.
Where they are created, estate management companies need a means to recover sums owed to them. Failure to do so means that costs may fall on other home owners, or the upkeep of an estate will worsen, to the detriment of everyone living on that estate. The problem may be particularly acute for resident-led management companies which do not have alternative sources of funding.
It is important that we fully understand any unintended consequences. This is an issue that we are carefully considering. I hope that, with those assurances, the noble Baroness will withdraw her amendment.

Lord Kennedy of Southwark: My Lords, before the Minister sits down, most of what she said was very welcome. The acceptance that forfeiture is draconian, unfair and open to abuse—we agree with that. It is not the right way to do things, as the Minister said.
Specifically on inequality, we all agree with that, and it was good to hear the Government say that. A bit more disappointing was that I did not hear the Minister say, “I want to meet colleagues”; nor, “We hope to bring an amendment back on Report to address this”. All we got was, “We will formulate our position”.
There is agreement around the Chamber that what we need to see is an amendment that addresses all these issues. We would like a commitment to get us all together, and to hear from the Minister that she hopes there will be an amendment on Report. If we do not do that, there have been lots of warm words here but not much else has been achieved.

Baroness Scott of Bybrook: My Lords, I thought the Committee was probably fed up with me saying that I am always very happy to meet any group of noble Lords, on any subject, at any time. I apologise for not saying it in this group, and I will never ever forget to say it in any group in the future. Also, I said that we will report back to the House shortly with more details. I think the noble Lord needs to look at those words—they are quite positive.

Lord Kennedy of Southwark: I am not saying they are not positive. At the end of the day, to make progress we need a government amendment, or an amendment that somebody else tables that the  Government will support, at the next stage. That is progress; that is what I am trying to push. I know the Minister is very generous with her time, and wants to get this right, and wants to meet colleagues. I am just trying to get it on the record, that is all. I know the Minister has been good every time that colleagues have raised this issue in the House, and I have a Question on it again on, I think, 22 May. I thank her very much.

Baroness Taylor of Stevenage: My Lords, I thank the Minister for her response. I thank the noble Baroness, Lady Pinnock, for supporting these amendments and the noble Lords, Lord Truscott, Lord Kennedy and Lord Bailey, for their comments.
In relation to the Minister’s comments about the time it takes to do this, I repeat that the Conservative Party has had this in its manifesto since 2017, so there has been quite a lot of time to think this through and have a look at this. It is a bit disappointing that we are in Committee in the House of Lords with some of these key issues still unresolved.
I ask your Lordships to reflect on, first, the example I gave in the earlier debate, of the elderly couple who told me they have a dispute with their landlord and are being threatened with forfeiture. They potentially have a £15,000 bill for the costs. If they pay that charge it is taken as agreement, but failure to pay it means that the landlord can invoke forfeiture, so where do they go? That is an awful position to put people in.
My second example is a young lady who I was out with the other day doing our political work. She lives in a leasehold flat; she put a political poster up in her window and then, almost immediately, received a letter from the landlord threatening her with forfeiture because that breached the terms of her lease. That seems an onerous way of dealing with a relatively small issue.
I listened carefully to the noble Lord, Lord Truscott, and he is right that there needs to be some form of resolution to this that means it does not need to go to the High Court—but it should certainly not be forfeiture, which is totally disproportionate. There may be a need to consider remedies other than the big sledgehammer of the High Court. Threatening to repossess people’s homes is certainly not an answer to technical breaches of lease.
Regarding rent charges, they will still be in place until 2037. We have to look at this and see whether we can find some way of getting rid of them before then.
As the noble Lord, Lord Kennedy, said, if we have to bring this amendment back again, we will, but I would rather the Government did so. That said, I withdraw the amendment.
Amendment 55 withdrawn.
Clause 46 agreed.

Amendment 56

Baroness Scott of Bybrook: Moved by Baroness Scott of Bybrook
56: Before Schedule 9, insert the following new Schedule—“Schedule  Part 2: consequential amendments to other legislationParliamentary Commissioner Act 19671 In Schedule 4 to the Parliamentary Commissioner Act 1967 (relevant tribunals), in the entry relating to rent assessment committees, omit “and also known as leasehold valuation tribunals for the purpose of determinations pursuant to section 21(1), (2) and (3) of the Leasehold Reform Act 1967”.Leasehold Reform Act 19792 In section 1 of the Leasehold Reform Act 1979 (price of enfranchisement under the LRA 1967 not to be made less favourable by reference to superior interest), in subsection (1), after “the price payable on a conveyance for giving effect to that section” insert “, in a case where the price payable is determined under section 9(1) of that Act by virtue of section 7A of that Act,”.Local Government Act 19853 In Schedule 13 to the Local Government Act 1985 (residuary bodies)—(a) in paragraph 14(aa), at the end insert “, where it applies by virtue of section 7A or 32(5) of that Act”;(b) omit paragraph 17.Housing Act 19854 In the Housing Act 1985—(a) in section 115 (meaning of “long tenancy”)—(i) for subsection (2)(c) substitute—“(c) at the time it is granted, it complies with the specified requirements.”;(ii) after subsection (2) insert—“(3) The “specified requirements” are—(a) in the case of a tenancy granted before 11 December 1987, the requirements of the Housing (Exclusion of Shared Ownership Tenancies from the Leasehold Reform Act 1967) Regulations 1982 (S.I. 1982/62) (including where the tenancy was granted before those regulations came into force);(b) in the case of a tenancy granted on or after 11 December 1987 and before the 2024 Act commencement day, the requirements in paragraph 2 of Schedule 2 to the Housing Association Shared Ownership Leases (Exclusion from Leasehold Reform Act 1967 and Rent Act 1977) Regulations 1987 (S.I. 1987/1940);(c) in the case of a tenancy granted on or after the 2024 Act commencement day, requirements specified in regulations made by the appropriate authority.(4) The “2024 Act commencement day” is the day on which paragraph 11 of Schedule 8 to the Leasehold and Freehold Reform Act 2024 comes into force.(5) “The appropriate authority” means—(a) in relation to England, the Secretary of State;(b) in relation to Wales, the Welsh Ministers.(6) Regulations under subsection (3)(c)—(a) are to be made by statutory instrument;(b) may make provision generally or only in relation to specific cases;(c) may make different provision for different purposes or different areas;(d) may include supplementary, incidental, transitional or saving provision.(7) A statutory instrument containing regulations under this section is subject to annulment in pursuance of—(a) where it contains regulations made by the Secretary of State, a resolution of either House of Parliament;  (b) where it contains regulations made by the Welsh Ministers, a resolution of Senedd Cymru.”;(b) omit section 175 (determination of price payable on enfranchisement under LRA 1967 where tenancy created under right to buy).Landlord and Tenant Act 19855 In section 26 of the LTA 1985 (exception to service charge restrictions for public authority tenants)—(a) for subsection (3)(c) substitute—“(c) at the time it is granted it complies with the specified requirements.”;(b) after subsection (3) insert—“(4) The “specified requirements” are—(a) in the case of a tenancy granted before 11 December 1987, the requirements of the Housing (Exclusion of Shared Ownership Tenancies from the Leasehold Reform Act 1967) Regulations 1982 (S.I. 1982/62) (including where the tenancy was granted before those regulations came into force);(b) in the case of a tenancy granted on or after 11 December 1987 and before the 2024 Act commencement day, the requirements in paragraph 2 of Schedule 2 to the Housing Association Shared Ownership Leases (Exclusion from Leasehold Reform Act 1967 and Rent Act 1977) Regulations 1987 (S.I. 1987/1940);(c) in the case of a tenancy granted on or after the 2024 Act commencement day, requirements specified in regulations made by the appropriate authority.(5) The “2024 Act commencement day” is the day on which paragraph 11 of Schedule 8 to the Leasehold and Freehold Reform Act 2024 comes into force.(6) Regulations under subsection (4)(c)—(a) are to be made by statutory instrument;(b) may make provision generally or only in relation to specific cases;(c) may make different provision for different purposes or different areas;(d) may include supplementary, incidental, transitional or saving provision.(7) A statutory instrument containing regulations under this section is subject to the negative procedure.”Housing and Planning Act 19866 In Schedule 4 to the Housing and Planning Act 1986 (shared ownership leases), in paragraph 11 (transitional provisions and savings)—(a) in sub-paragraph (1), at the end insert “, subject to sub-paragraphs (1A) and (2)”;(b) for sub-paragraph (2) substitute—“(1A) The amendment made by paragraph 7 (repeal of section 140 of the Housing Act 1980) also applies in relation to leases granted before the commencement of this Schedule, except in cases where, under section 7A or 32(5) of the Leasehold Reform Act 1967, the Leasehold Reform Act 1967 has effect without the amendments made by the Leasehold and Freehold Reform Act 2024.(2) In those cases, this Schedule does not affect the operation of section 140 of the Housing Act 1980, the enactments applying that section or regulations made under it.”Housing Act 19887 In Schedule 17 to the Housing Act 1988 (minor and consequential amendments)—(a) omit paragraph 40;(b) omit paragraph 68.   Local Government and Housing Act 1989 8 In paragraph 5 of Schedule 10 to the Local Government and Housing Act 1989 (security of tenure for long residential leases)—(a) in sub-paragraph (4), for the words from “unless” to the end substitute “unless—(a) the landlord is a relevant authority, and(b) the premises are required for relevant development.”;(b) after sub-paragraph (4) insert—“(4A) For those purposes—(a) “relevant authority” means a person referred to in any paragraph of section 38(2) of the Leasehold Reform Act 1967;(b) “relevant development”—(i) in relation to a relevant authority other than a health authority, means development for the purposes (other than investment purposes) of that body;(ii) in relation to a relevant authority that is a health authority, means development for the purposes of the National Health Service Act 2006 or the National Health Service (Wales) Act 2006;(iii) in relation to a relevant authority that is a university body, also includes development for the purposes of any related university body;(iv) in relation to a relevant authority that is a local authority, also includes area development;(c) “health authority” means—(i) NHS England;(ii) any integrated care board;(iii) any Local Health Board;(iv) any Special Health Authority;(v) any National Health Service trust;(vi) any NHS foundation trust;(vii) any clinical commissioning group;(viii) any Strategic Health Authority;(ix) any Primary Care Trust;(d) “university body” and “related university body” have the same meaning as in section 29(6ZA) of the Leasehold Reform Act 1967;(e) “local authority” has the same meaning as in section 29(5) of the Leasehold Reform Act 1967;(f) “area development” means any development to be undertaken, whether or not by a local authority, in order to secure—(i) the development or redevelopment of an area defined by a development plan under the Planning and Compulsory Purchase Act 2004 as an area of comprehensive development;(ii) the treatment as a whole, by development, redevelopment or improvement, or partly by one and partly by another method, of any area in which the premises are situated.”Local Government (Wales) Act 19949 In Schedule 13 to the Local Government (Wales) Act 1994, in paragraph 24—(a) omit paragraph (b);(b) in paragraph (c), at the end insert “, where it applies by virtue of section 7A or 32(5) of that Act”.Housing Act 199610 In the Housing Act 1996—(a) omit section 109 (collective enfranchisement: valuation);(b) omit section 110 (lease extension for flats: valuation);(c) in Schedule 10 (consequential amendments)—  (i) in paragraph 6, omit sub-paragraph (4); (ii) omit paragraph 18;(d) in Schedule 11 (compensation for postponement of termination in connection with ineffective claims)—(i) in paragraph 2, omit sub-paragraph (2);(ii) in paragraph 3, omit sub-paragraph (2).Commonhold and Leasehold Reform Act 200211 In the CLRA 2002—(a) omit section 126 (collective enfranchisement: valuation date);(b) omit section 127 (collective enfranchisement: freeholder’s share of marriage value);(c) omit section 128 (collective enfranchisement: disregard of marriage value for very long leases);(d) in section 130 (lease extension for flats: residence test), omit subsection (2);(e) omit section 132 (lease extension for flats: personal representatives);(f) omit section 134 (lease extension for flats: valuation date);(g) omit section 135 (lease extension for flats: freeholder’s share of marriage value);(h) omit section 136 (lease extension for flats: disregard of marriage value for very long leases);(i) in Schedule 13 (leasehold valuation tribunals), omit paragraph 15.Finance Act 200312 In the Finance Act 2003—(a) in Schedule 4 (stamp duty land tax: chargeable consideration), for paragraph 16C substitute—“16C The following do not count as chargeable consideration—(a) costs borne by the purchaser under section 9(4) of the Leasehold Reform Act 1967, where it applies by virtue of section 7A of that Act;(b) any amount payable by the purchaser under section 19C of the Leasehold Reform Act 1967;(c) any amount payable by the purchaser under section 89C or 89D of the Leasehold Reform, Housing and Urban Development Act 1993.”(b) in Schedule 17A (leases: further provision), in paragraph 10 (tenants’ obligations etc that do not count as chargeable consideration), for sub-paragraph (1)(f) substitute—“(f) any liability of the tenant for costs under section 14(2) of the Leasehold Reform Act 1967, where it applies by virtue of section 32(5) of that Act;(fa) any amount payable by the tenant under section 19C of the Leasehold Reform Act 1967 or section 89F of the Leasehold Reform, Housing and Urban Development Act 1993;”Companies Act 200613 In section 1181 of the Companies Act 2006 (access to constitutional documents of RTE and RTM companies)—(a) in the heading, omit “RTE and”;(b) in subsection (1), omit paragraph (a);(c) in subsection (4), omit the definition of “RTE companies”.Enterprise and Regulatory Reform Act 201314 In section 84 of the Enterprise and Regulatory Reform Act 2013 (redress schemes: property management work), in subsection (10), omit the words from “or which” to the end.   Immigration Act 201415 In Schedule 3 to the Immigration Act 2014 (excluded residential tenancy agreements), in paragraph 13(2)(a), omit the words from “or which” to the end.Consumer Rights Act 201516 In section 88 of the Consumer Rights Act 2015 (duty of letting agents to publicise fees: supplementary provisions), in subsection (1), in the definition of “long lease”, omit paragraph (a)(ii) and the “or” preceding it.Housing and Planning Act 201617 In Schedule 10 to the Housing and Planning Act 2016 (leasehold enfranchisement and extension: calculations)—(a) omit paragraph 4;(b) omit paragraph 5.Tenant Fees Act 201918 In section 28 of the Tenant Fees Act 2019 (interpretation), in subsection (1), in the definition of “long lease”, omit paragraph (b) and the “or” preceding it.Building Safety Act 202219 In Schedule 8 to the BSA 2022 (remediation costs), in paragraph 6 (permitted maximum)—(a) in sub-paragraph (5), omit “total” in each place it occurs;(b) in sub-paragraph (8)—(i) for “total” substitute “tenant’s”;(ii) for “section 7” substitute “section 101(1)”.”Member's explanatory statementThis new Schedule would make amendments to other legislation in consequence of Part 2.
Amendment 56 agreed.

  
Schedule 9: Right to vary lease to replace rent with peppercorn rent

Amendment 57

Lord Khan of Burnley: Moved by Lord Khan of Burnley
57: Schedule 9, page 204, line 15, leave out sub-paragraph (a)Member's explanatory statementThis amendment would ensure that all leaseholders, not just those with residential leases of 150 years or over, have the right to vary their lease to replace rent with peppercorn rent.

Lord Khan of Burnley: My Lords, I will speak to Amendment 57 in the name of my noble friend Lady Taylor of Stevenage. Schedule 9 makes provision for a new enfranchisement right to buy out the ground rent and to vary it permanently to replace the relevant part of the rent with a peppercorn rent, without having to extend the lease. We welcome the intent of the schedule. The reform will ensure that leaseholders can enjoy reduced premiums and secure nominal ground rent ownership of their properties, without the need to go through the challenge and expense of repeated lease extensions.
The schedule implements the Law Commission’s recommendation for the right to extinguish the ground rent only. However, we have brought an amendment that would delete the Government’s proposed 150-year threshold, to press the Minister on the reason for which the Government have decided to confer that right only on leaseholders with leases with an unexpired term of more than 150 years.
The Law Commission recommended that the threshold should be set at 250 years on the basis that the reversion is of negligible value at that lease length. The Government chose not to accept that recommendation and, instead, are proposing a threshold of 150 years. The Minister may provide us with a different answer in due course, but we assume the reason that they did so is simply that this will make the new right to extinguish a ground- rent available to many more leaseholders. However, if that is the case, it obviously follows that setting a threshold of, say, 125 or 100 years would make it available to even more of them.
As my honourable friend Matthew Pennycook MP stipulated in the other place,
“any long lease threshold for the new right is ultimately entirely arbitrary, as evidenced by the fact that the Government chose a different threshold from the one recommended by the Law Commission
There is a principled argument that we should trust leaseholders to make decisions based on what is right for them and their individual circumstances, rather than denying a broad category of leaseholders a new statutory right on the basis that Ministers know best what is in their interests.
If unamended, Schedule 9 will ensure that some leaseholders can enjoy reduced premiums and secure nominal ground rent ownership of their properties, without the need to go through the challenge and expense of repeated lease extensions. However, we remain unconvinced by the Government’s proposed conferral of this new right only on leaseholders with leases with an unexpired term of more than 150 years. There could be all sorts of reasons why someone with a lease shorter than 150 years might want to buy out only the ground rent, including simply that they are unable to afford the premium required to secure a 990-year lease. Denying them that right on the grounds that other leaseholders might advertently or inadvertently disadvantage themselves, by using the new right to extinguish only the ground rent, strikes us as overly paternalistic and misguided.
We remain of the view that there is a strong case for simply deleting the 150-year threshold entirely, given that the remaining years test that applies is arbitrary and the most common forms of lease are 90, 99 and 125 years. Amendment 57 would do that, thereby making the new right to replace rent with a peppercorn rent available to all existing leaseholders. I beg to move.

Baroness Thornhill: My Lords, I support Amendment 57 in the name of the noble Baroness, Lady Taylor of Stevenage. As has been said, Schedule 9 confers on a qualifying tenant the right to buy out the ground rent and replace it with a peppercorn rent. Instead of the extended leases that are paid for each time, it is a decision to make a one-off payment—job done once and for all.
This is a welcome measure. However, as has been said, under paragraph 2 of Schedule 9, the tenant must have at least 150 years left on their lease to qualify. Amendment 57 from the noble Baroness, Lady Taylor of Stevenage, would ensure that all leaseholders, not just those with residential leases of 150 years or over, have the right to vary their lease in this way and replace it with a peppercorn rent.
The provisions on the variation of leases and removal of ground rent are complex, but they are based on the principle of granting leaseholders flexibility and a recognition that different solutions might be preferable for the different situations that they are in. The argument has been put forward that these provisions should apply to leases that are sufficiently long, with the Law Commission recommending a very long length of 250 years and the Government settling on 150. Therefore, Amendment 57 rightly probes that length. If not 250 years, why not 125 years, 90 years or indeed no threshold for length at all?
Data on this was hard to find, but DLUHC’s English Housing Survey of owner-occupier leaseholders for the year 2020-21 found that 45% of leaseholders had a leasehold term between 71 and 120 years, and that the median length of leases was 112 years. This suggests that there could be lots of leaseholders with reasonably long leases who would not be given these rights in relation to ground rent.
I would also like colleagues to note that mortgage lenders are now getting very active on ground rent terms and taking an ever more conservative view on ground rent clauses. They are refusing to lend on leasehold homes where the ground rent is seen as onerous—the definition of that might be that it continues to double or that there are other strictures in place. This means that some leaseholders will be left with flats that are difficult to sell, as well as an escalating ground rent.
We would therefore welcome further information from the Minister about whether these provisions could be extended to cover more leaseholders, especially given their own figures.

Baroness Scott of Bybrook: My Lords, I will speak to government Amendments 58 and 59 in my name. Government Amendment 59 changes “premium” to “price”, referring to the sum paid for a ground rent buyout, to make the language consistent with the rest of the Bill. Government Amendment 58 makes a minor wording change to clarify that it is “the appropriate tribunal” that may make an order to appoint a person to vary a lease on behalf of the landlord or tenant in the case of a commutation following a ground rent buyout. I hope noble Lords will therefore support these amendments.
I turn to Amendment 57 from the noble Baroness, Lady Taylor, and moved by the noble Lord, Lord Khan of Burnley. This seeks to remove the threshold for the ground rent buyout right. I appreciate the concerns that lie behind this amendment and understand that the noble Baroness is seeking to ensure that as many leaseholders as possible can benefit from the new right. First, it is very important to note that all leaseholders, regardless of their term remaining, have the means to buy out their ground rent. They do so whenever they extend their lease or buy their freehold. It is only the right to buy out the ground rent without extending the lease or buying the freehold that is limited to leaseholders with 150 years or more remaining. The 150-year threshold exists to protect those leaseholders with shorter leases who will, at some point, require an extension from being financially disadvantaged by first buying out their rent, only having to extend later and paying more  in total for doing so. However, we understand the argument that all leaseholders should be able to buy out their rent without extending their lease or buying their freehold if they want to, and we are listening carefully to that argument.
The Law Commission recommended 250 years, but it noted that the department might want to set the threshold lower. The department’s analysis showed that 150 years would enable more leaseholders to take advantage of the ground rent buyout right, while still being a long enough term remaining that the leaseholder does not need to extend if they do not want to. A lower minimum term would create a risk that poorly advised leaseholders might buy out the ground rent when an extension is in their best interest, then find out that they need to extend later and have to pay a higher premium, except for the extension, and two sets of transaction costs. We believe this is helping the leaseholder.
I hope that the noble Baroness will appreciate the reasons we have given for the existence of the threshold, and those assurances, and withdraw her amendment.

Lord Khan of Burnley: My Lords, I rise very briefly to thank the Minister for her response. I appreciate the comments made by the noble Baroness, Lady Thornhill. In the future, we will look to work with colleagues across the House to see where we are on this. In the meantime, I beg leave to withdraw my amendment.
Amendment 57 withdrawn.

Amendments 58 and 59

Baroness Scott of Bybrook: Moved by Baroness Scott of Bybrook
58: Schedule 9, page 212, line 22, at beginning insert “the appropriate tribunal may”Member's explanatory statementThis amendment would correct an error.
59: Schedule 9, page 221, line 16, first column, leave out “premium” and insert “price”Member's explanatory statementThis amendment would reflect other amendments in the Bill to change references to the premium to references to the price.
Amendments 58 and 59 agreed.
Schedule 9, as amended, agreed.
Clause 47 agreed.

  
Clause 48: Costs of right to manage claims

Amendment 60

Baroness Taylor of Stevenage: Moved by Baroness Taylor of Stevenage
60: Clause 48, page 57, leave out from line 23 to line 23 on page 58Member's explanatory statementThis amendment would leave out the proposed new section 87B of the Commonhold and Leasehold Reform Act 2002 and so ensure that RTM companies cannot incur costs in instances where claims cease.

Baroness Taylor of Stevenage: My Lords, our amendment in this group refers to the fact that the Bill currently makes an exception to litigation costs being borne by landlords in the case where right-to-manage claims have been withdrawn or otherwise ceased early and the right-to-management company has acted unreasonably in bringing the right-to-management claim, allowing the landlord to apply to the tribunal for any reasonable costs.
The key arguments for the amendment are that, first, leaseholders should not be put at risk of having to pay costs simply for exercising statutory rights, in this case the right to seek to acquire and exercise rights in relation to the management of premises in which one has a leasehold interest. There is also concern that unscrupulous landlords might use the rights provided for in new Section 87B of the Commonhold and Leasehold Reform Act 2002 as a means of recovering costs from right-to-manage companies that act reasonably and in good faith and, by implication, that it would discourage right-to-manage companies from initiating a claim because of the financial risk it still entails for individual participating leaseholders. Put simply, the fear is that new Section 87B will incentivise unscrupulous landlords to fight claims on the basis that they are defective in the hope of recovering costs by means of it. Our main concern regarding Clause 48 is that the use of the words “reasonable fee” and “reasonable costs” would not allow either of the above situations to occur. I ask the Minister: who will determine the definition of “reasonable”, and how?
I will comment on other amendments. We think that the amendments tabled by the noble Lord, Lord Bailey, are very reasonable, and we support his aims here. In fact, colleagues in the other place submitted similar amendments in Committee.
I also look forward to hearing the noble Lord, Lord Moylan, introduce his amendments, which would incorporate local authorities and their properties, both within the HRA and without, but I ask whether he had discussions about this proposal with the Local Government Association or local authority stockholders. Most good local authority landlords already have substantial arrangements in place for liaison with leaseholders and tenants around the management of property, and there is certainly no issue with improving that through more effective right-to-manage arrangements. However, as much local authority property will be occupied by a mixture of local authority tenants and leaseholders, it would be important to ensure that there were no unintended consequences. I urge that that level of consultation takes place before any proposal such as this proceeds further. The noble Lord, Lord Moylan, will forgive me if he has already done that consultation, but it was not clear from the amendments. With that, I beg to move Amendment 60.

Lord Moylan: My Lords, it is a privilege to speak after the noble Baroness. I will come to answering her question. To give a blunt answer, I have not undertaken the consultation that she refers to, but I will explain when I get to that part of my introduction why I think that this stands on its own.
As I said at Second Reading, I strongly support those parts of the Bill which facilitate the exercise of the right to manage on the part of leaseholders in  residential blocks. There are several measures in the Bill which do that. The right to manage is, in some ways, the crucial key to unlocking the levels of dissatisfaction which some leaseholders have with the way in which their blocks are managed. I strongly support it.
There is a particular issue which the Bill does not address. As a consequence of my general support for this—contrary to my remarks in earlier debates— I hope that the Government will give me a softer and more welcoming answer. As a result of my proposal, perhaps my noble friend on the Front Bench will even give me one of those answers which invites me to attend a meeting. In fact, I have had a meeting with my noble friend about this, though she may not recall it. We met last summer to discuss this issue with officials, and she was very sympathetic to it. That gives me additional reasons for thinking that this might be a welcome amendment.
The amendment arises from a particular case, but it raises questions of general importance. I shall refer to the case later, but I want to address the question of general importance first. When the right to manage was introduced through the Commonhold and Leasehold Reform Act 2002, certain exceptions were placed on it. The Government intend to ease some of those restrictions, and I welcome that. One restriction was that the right to manage did not apply where the landlord of the building was a local housing authority.
I have tabled two alternative amendments—this is my point about consultation. Both amendments would reverse that assumption. One would eliminate it entirely. It would bring within the ambit of right to manage all blocks where the local housing authority was the landlord, including those within the housing revenue account. The noble Baroness, Lady Taylor of Stevenage, said that this could raise certain difficulties in cases where a block had so many long lease holders that it could exercise the right to manage but would be left with certain local authority tenants in the block. I have experience of local government, as does the noble Baroness. I recognise that she is correct in saying that there might be certain sensitivities about this. I think it could be managed. Indeed, it would be liberating for all the tenants of the block in many ways. The local authority tenants would also have a say in the management of the block. They would not be excluded from it simply because they were local authority tenants.
Recognising that this is a slightly daring proposition, I have suggested an alternative which would simply take out of the provision local housing authority-owned blocks where they were owned simply as an investment. I have left it vague as to whether that is a commercial investment or one held in the local authority’s pension fund. These are probing amendments. I should be happy to discuss these issues with my noble friend the Minister.
I come now to a particular case. There are blocks where local authorities have acquired property as an investment. Doing so immediately extinguishes the right of the long lease holders to exercise their right to manage—there are no local authority tenants. I think that is wrong. The case I am thinking of concerns a block acquired by a London local authority from a commercial property investment trust, bought at market  value as an investment. The local authority, the new owner, was dissatisfied with the accounts inherited from the previous manager—it had their own manager for the block. As a result, it has not been able to put satisfactory accounts together for the last three years. As a consequence, it has not had the legal standing to issue invoices to its tenants for its service charges. It has been running the building’s operating costs out of the capital sums that had been set aside as a sinking fund to pay for future improvements to the building. It is all very unsatisfactory.
That is a classic situation in which long leaseholders would normally exercise the right to manage but, completely arbitrarily, are precluded from doing so. That is wrong. We should facilitate this.
At the very least, my noble friend should welcome my second amendment, Amendment 62, and say that where a local authority acquires a property for commercial purposes—not for the housing of its tenants but as an investment, either in its own name or as part of its pension fund—the right to manage would be restored. The financial interests of the local authority would be preserved, as they are under the current arrangements. It is simply that the right to manage the building would be taken over by the long leaseholders, as elsewhere, and they would manage it in just the same way as in all the other right-to-manage arrangements we are so much in favour of.
I will stop at that point because I have simply made my case, but this is a strange omission from the current arrangements, and one that we now have an opportunity to correct. I would be very happy to attend the meeting.

Lord Bailey of Paddington: My Lords, I will speak to my Amendments 65A and 65B. The Government should be applauded for their ambitions as laid out in the Bill. Let us hope that we can achieve them all. I put on record that I am pleased with the Government’s direction of travel, because some of my interventions up until now may have seemed slightly belligerent, but can my noble friend the Minister provide some reassurance around the Government’s stated aim of a revolution in the right to manage? That would help to address what, for me, is at the heart of what I consider the leasehold scandal, which is really about control. Leaseholders in England and Wales are unique in the lack of control that they have. Worldwide, leaseholders and those with commonhold and many other types of tenure have much more control. I believe that is something the Bill can address, and the Government have to demonstrate that they want to deliver on it. Indeed, it was our own Secretary of State who said that he wants to see a revolution in the right to manage.
I put on record my colleagues Nickie Aiken and Barry Gardiner, who brought a very similar amendment in the other place. Amendment 65A seeks to ensure that leaseholders in mixed-use property who would otherwise qualify for the right to manage because 50% or more of the floorspace is residential, but because of a technicality—a boiler or an underground car park—are prevented from having that management given to them, still have that right. The current test means that you have to demonstrate that your building is self-contained or that the residential part is partly  self-contained, but the layout of the building might suggest that it is not self-contained due to an underground car park or boiler room, when actually it is.
The Law Commission saw these two tests as too strict. It suggested that a third test could be set whereby, if it could be demonstrated that people are reasonably capable of managing the residential area fully independently, they should be given access to this power. As I have stated in most of the debate, the thing that most drives me is the potential for the abuse of service charging. Giving residents control over their assets is clearly the answer to that.
The amendment does not mean that leaseholders can take over the management of shops, hotels or commercial premises. That is not the idea of the amendment. The right to manage applies exclusively to the residential parts, such as corridors and lift lobbies —parts of the building used only by residents. The amendment does not seek to change that position.
At Second Reading, I made the point that even the leading freeholder lobby group pointed out that free- holders own, at best, only 2.5% of the capital interest in the buildings they have the freehold of. That leads me to my other amendment, Amendment 65B. We must lower the threshold at which a group of people can take over the management of that lease. It is currently at 50%. I suggest that it should be at around 35%—again, to help the Government achieve their stated aim of a revolution in right to manage.
Modern blocks, modern life and modern investment vehicles mean that it is often impossible to get hold of 50% of the residents. People live abroad or sublet, and so on. If we want people to have that control, and I dearly do, we need to lower that threshold. I am pleased to note that the Law Commission believes that this recommendation, if adopted, would curtail some of the litigation. There is a real culture of litigation around the right to manage and the technicalities. A lot of bad actors are able to get away with their residents taking the right to manage over that building. Similarly, leaseholders will need to show to other leaseholders that this can be done properly, and that is easily done. What is often talked about is leaseholders running the contracts themselves. Of course, they would not; they would get a management company in. They would be able to kick out a management company that is ripping them off and replace it with one that is actually offering them a service, keeping their bills low and therefore increasing the value of the investment they have made in their flat.
On Monday, the Minister talked about measures that the Government want to bring in to provide transparency around the charging regimes that landlords put in place. When I lived in a leasehold property, I did not want to know how I was being ripped off; I wanted to know that I had the ability to do something about it. The right to manage is the way to do something about it—to reduce those bills, create greater competition in the market and get better service for leaseholders countrywide.
In short, both these amendments are designed to push forward the Government’s will, their desire, to boost the right to manage. But we have to lower the  threshold—the number that one needs to take hold of that right. We also have to make sure that bad actors, bad landlords, cannot avoid that on a technicality by saying that the plant room or the underground car park, for example, means that the building cannot be managed separately. In many cases, it is managed separately and leaseholders often use that to demonstrate that they could take over the purely residential parts.

Baroness Thornhill: My Lords, I have asked to speak to the amendments in this group, which is a bit shorter than it would have been had the Clause 47 stand part notice remained. That was certainly something on which I would have urged the Government to stand firm.
We strongly support Amendment 60 in the name of the noble Baroness, Lady Taylor of Stevenage. Anyone who has done a bit of googling on the right to manage can see that right-to-manage claims by leaseholders are often fiercely opposed by freeholders. What is meant to be a so-called no-fault process can involve costly and stressful litigation for leaseholders, as freeholders drag the right to manage claim into the tribunal system. Freeholders gameplay and try to block RTM bids, because the right to manage signifies loss of their control and ability to rip off leaseholders in perpetuity.
Against this backdrop of right-to-manage cases going to tribunal and becoming the subject of “lawfare” by freeholders, it is surely reasonable to ensure that right-to-manage companies cannot incur costs in instances where claims cease. The way things stand, it is clearly intended to be a disincentive to leaseholders to seek the right to manage, and that imbalance cannot be right. Some noble Lords may remember the Canary Gateway case: it took an outrageous four years for the shared-ownership leaseholders to secure their right to manage, with the freeholder-driven litigation going as far as the Court of Appeal.
Turning to Amendments 61 and 62 in the name of the noble Lord, Lord Moylan, we on these Benches would support them in principle as they are increasingly sold as access to the right to manage. However, they stand in stark contrast to the noble Lord’s other amendments, which sought to reduce leaseholder access to collective enfranchisement and right to manage.

Lord Moylan: My Lords—

Baroness Thornhill: I hesitated and thought about cutting that bit out, but go on.

Lord Moylan: The noble Baroness could not expect to get away with that. Any attempt to cast me as a as a poodle of freeholders and opposed to leaseholders is bound to be foiled because it is untrue. I have made it clear throughout that I strongly support the right to manage and its extension. This is very different from expropriation of somebody else’s property. This is simply a technique for managing a building and managing it well.
I should also say while I am on my feet that when we exercised the right to manage in the block in which I live, many years ago, the freeholder was highly supportive because they were sick to death of the  managing agent as well, and realised that their building would be managed a great deal better by us, as it has been. They have an interest in the building being well managed: they want the roof to be repaired; they want the facade not to fall off in chunks in the street because, after all, they, too, whatever else is said, have a long-term interest in the building.

Baroness Thornhill: My comments were not about right to manage. That was a good segue into another short speech by the noble Lord.
However, we are conscious that expanding right to manage to leaseholders under local authority landlords was never considered by the Law Commission, nor put out to public consultation. We are unsure whether the Government have done policy work in this area. It is a whole other ball game and will be challenging. But, in principle, given that many local authorities have been guilty of significant and tragic failures of service, to put it mildly, this should be a right of local authority tenants too. But it will be complex, for many of the reasons that were well outlined by the noble Baroness, Lady Taylor.
It is also worth reminding ourselves that local authority leaseholders have, since 1994, been able to take over management through tenant management organisations. I do not believe any work has been done regarding their success or otherwise. But such a review could ignite and inform this topic on another occasion. We welcome the probe by the noble Lord, Lord Moylan, and also the subtleties of his alternative proposals, and will certainly attend the said—and very popular —meeting.
Finally, I come to Amendments 65A and 65B, in the name of Lord Bailey of Paddington. The aim of Amendment 65A is a good one: to ensure that leaseholders in mixed-use buildings can avail themselves of the right to manage. At the House of Commons Public Bill Committee in January, MPs heard that many leaseholders in mixed-use buildings would still be unable to benefit from the reforms in the Bill to take over management—because, as the noble Lord said, of the existence of, say, a shared plant room or car park, under rules regarding structural dependency and self-containment. The existence of a plant room or other infrastructure is something decided by the original developer and leaseholders have no control over these factors, so it feels unfair to exclude them from right to manage based on the way a block has been designed, especially if they qualify under the new 50% non-residential premises limit.
Amendment 65B would put rocket boosters under the right to manage, opening it up to far more leaseholders. We on these Benches support the amendment and the intent behind it. Members in the other place have raised concerns that the 50% trigger is too high. The 50% participation limit on right to manage was also flagged as an issue by leaseholder campaigners at the Commons Public Bill Committee in January.
There may be concerns about 50% being less than a majority, but, as the noble Lord said, many leaseholders will never be able to obtain 50% support because of the high levels of buy to let in their block. But ultimately the Committee was persuaded of the case to bring  down the 50% threshold. It is not right that just one person—the freeholder or landlord—has such control over leaseholders and can impact almost at will on their finances. As the noble Lord’s amendment suggests, 35% of leaseholders triggering a right to manage, with a right to participate for remaining leaseholders who did not originally get involved, is a far better situation than rule by one freeholder, whose interests, as the Law Commission concluded, are diametrically opposed to that of the leaseholder. Leaseholder self-rule with right to manage and a 35% participation threshold is a much more democratic state of affairs. Let us be honest: many councillors and MPs are elected to govern on much less than 50% of the vote—in fact, usually around 35%.

Baroness Scott of Bybrook: My Lords, I thank the noble Baroness, Lady Taylor of Stevenage, for Amendment 60, which would leave new Section 87B out of the Commonhold and Leasehold Reform Act 2002. This is a new power, inserted into the 2002 Act by the Bill, for the tribunal to order the repayment of a landlord’s process costs for right to manage claims which are withdrawn or cease to have effect in circumstances where a right to manage company has acted unreasonably.
The noble Baroness asked who would decide what was reasonable or unreasonable and the level of reasonableness. The costs will be determined by the tribunal, as is the case with other kinds of litigation or court proceedings.
While we strive to reduce costs for leaseholders, we do not believe it is right to do so where the right to manage company acts unreasonably in bringing a claim and the claim also fails. For example, landlords should not have to meet their own wasted process costs where leaseholders clearly make an unfeasible claim or fail to bring the claim to an end at an earlier stage.
The noble Baroness should be assured that the new power for the tribunal does not automatically entitle landlords to repayment. If the tribunal does not consider that costs should be payable, it can decline to make an order. Removing new Section 87B would expose landlords to unfair costs. For these reasons, I ask the noble Baroness kindly to withdraw her amendment.
I thank my noble friend Lord Moylan for his Amendments 61 and 62. The amendments seek to remove or amend the existing exception to the right to manage for local authority premises so that the right can be used by their long lease holders. I should explain that there is a separate right to manage scheme for local authority secure tenants and leaseholders under the Housing Act 1985 and its relevant regulations. The Commonhold and Leasehold Reform Act 2002 therefore excepted local authority leaseholders from the long-leasehold right to manage to avoid creating conflicting schemes.
The Bill delivers the most impactful of the Law Commission’s recommendations on the right to manage, including increasing the non-residential limit to 50% to give more leaseholders the right to take over management, and changing the rules to make each party pay their own process and litigation costs, saving leaseholders many thousands of pounds.
An alternative route to management is available in some local authority blocks that contain a mixture of tenants and leaseholders, where a prescribed number and proportion of secure tenants are in support of exercising the right. This involves setting up a tenant management organisation. It would complicate a system that we are trying to simplify if two separate routes were to apply to a single block, and the Law Commission made no recommendations on local authority leaseholders.

Lord Moylan: My Lords, I have some familiarity with the Housing Act 1985 from my time in local government. I am reasonably well aware of the obligation to create tenant management organisations, which are often not block-specific but estate-wide or, in many cases, spread across the entire local authority council housing stock. It seems a strange way to go about trying to exercise the right to manage if we are discussing a block held as an investment that has no local authority tenants. Can my noble friend assure me that the Housing Act 1985 is an effective means for leaseholders in the circumstances I describe to exercise their right to manage, when in fact it is an obligation on a local authority rather than a right granted to long lease holders?

Baroness Scott of Bybrook: We believe this is the correct way of doing it. I would be very happy to meet my noble friend to discuss this further but, with the evidence we have, we agree this is the correct way forward. But I really am very happy to meet with the noble Lord.
This Bill will also make it cheaper and simpler for leaseholders to acquire their freehold or extend their lease. This will include local authority leaseholders. I recognise the intent behind the amendment and I have noted what my noble friend has said. At this point I ask him not to press his amendment, but I would be really happy to meet him. He gave us a lot of information in the time he was speaking and I would like to read Hansard as well to understand his arguments further.
I thank my noble friend Lord Bailey of Paddington for Amendment 65A, which would allow leaseholders in buildings or parts of buildings that are capable of being managed independently to claim the right to manage, even though buildings do not meet the criteria of being a self-contained building or a self-contained part of a building. I understand the intent of the amendment, which would reduce the incentive for landlords to challenge right to manage claims on technical arguments as to whether the existing “self-contained” tests are satisfied. The amendment would mean that the right to manage company would be eligible to acquire the right to manage on the grounds that such buildings are reasonably capable of being managed independently.
The Government support the aim of the amendment to improve leaseholders’ rights and we are taking forward key recommendations of the Law Commission that do this. The Bill delivers the most significant measures to increase access to right to manage and makes it simpler and cheaper for leaseholders to make a claim. To implement the wider recommendations, the Government need to proceed carefully and undertake  further work to ensure that the regime will operate satisfactorily. The Government will keep the remaining recommendations from the Law Commission’s right to manage report under consideration following the implementation of the Bill’s provisions. I hope my noble friend agrees with me that the Bill does take forward the most significant measures on the right to manage, and the Government will need to carefully consider further right to manage recommendations.
I now turn to Amendment 65B, tabled by my noble friend Lord Bailey of Paddington, which would reduce the requirement for participating leaseholders claiming the right to manage from one-half to 35%. This has been brought up a number of times and we recognise that the participation requirement can cause difficulties if leaseholders cannot reach the threshold, but we believe a participation requirement of one-half of the residential units is proportionate, ensuring that the minority of leaseholders are prevented from exercising the right to manage, which may be against the wishes of the majority of leaseholders in a building. Reducing the participation requirement to 35% is disproportionate and would lead to undesirable outcomes, such as an increase in disputes. It would risk a situation where competing groups of minority leaseholders could make repeated claims against each other.
The Government accept the Law Commission’s recommendation to hold the participation requirement for the right to manage at one-half, following comprehensive consultation. I hope, hearing that, that my noble friend agrees that it means that a minority of leaseholders cannot unfairly take control of a building, potentially to the detriment of other leaseholders in the building.

Lord Bailey of Paddington: I have heard what my noble friend the Minister has had to say and I am minded to do as she asks—if I could get one of those meetings that she has to offer. I am sure then that we could come to an accommodation.

Baroness Scott of Bybrook: I will be very happy to spend a week in here so that noble Lords can come in and out and speak to me as they like—and I would love to meet my noble friend to talk about this further. He talked also about transparency and it not being terribly necessary. The problem is that, if you do not have transparency, sometimes you do not know you are being ripped off, because you do not have the required information—so I think transparency is actually really important.

Lord Bailey of Paddington: My Lords, it was not that I do not like transparency. I agree with my noble friend that transparency is very useful so you know whether you are being ripped off. I was making an appeal for the ability to intervene in the process of being ripped off. I have been on the other end of this situation, where people have quite happily told us what they are overcharging us for, but we had no mechanism to interfere in that. That is what I was more concerned with.

Baroness Scott of Bybrook: I thank my noble friend for that but, for the reasons I have put forward, I kindly ask him not to press his amendments.

Baroness Taylor of Stevenage: My Lords, I am grateful, as ever, to the Minister for her responses. It seems she is going to be very busy over the next few weeks, having all these meetings with all of us. I thank the noble Baroness, Lady Thornhill, for reminding me that, had the right reverend Prelate been here, I too would have objected strongly to the proposals he was making on Clause 47, because they would simply have opened the door to retaining the 25% limit, virtually across the property sector. I believe that would have gone against the intentions of the Bill, so she was right in what she said there and I thank her for her support for my amendment.
From this side of the House, I say to the noble Lord, Lord Bailey, that we welcome belligerent interventions from either side, but especially from the Benches opposite, so just keep going with those. We particularly agree with his Amendment 65B. If his meeting does not achieve the desired effect and he chooses to pursue this, he will certainly have our support.
I thank the noble Lord, Lord Moylan, very much for his explanation. I had not realised that these were either/or amendments, but I understand his point about property owned as an investment by a local authority or pension fund. I agree with his point about the principle of right to manage being extended as far as possible. That is absolutely right, although anything affecting local authorities needs to have some consultation with the sector, because we just do not know what any unintended consequence of that might mean. I hope he will consider that if he chooses to pursue this amendment, but perhaps the meeting with the Minister might allay his concerns in that regard. That said, I beg leave to withdraw my amendment.
Amendment 60 withdrawn.
Clause 48 agreed.
Clauses 49 and 50 agreed.
Amendments 61 and 62 not moved.

Amendment 63

Baroness Pinnock: Moved by Baroness Pinnock
63: After Clause 50, insert the following new Clause—“Report: restrictions around ground rent investments(1) Within six months of the day on which this Act is passed the Secretary of State must lay before Parliament a report outlining the impact of this Act on ground rent investments.(2) The report in subsection (1) must also make an assessment of the impact of—(a) prohibiting future ground rent investments, and(b) encouraging divestment from existing ground rent investmentson leaseholders and freeholders.(3) In this section “ground rent investment” means investment by a pension fund or other type of fund in leaseholds for the purpose of collecting ground rent.”Member’s explanatory statementThis is a probing amendment that would require the Government report on the impact of this Act on ground rent investments, and the impact of prohibiting future ground rent investments and encouraging divestment from existing ground rent investments on leaseholders and freeholders.

Baroness Pinnock: My Lords, Amendment 63 in my name was tabled to probe the impact of the proposals in the Bill on ground rent investments, and the effect of prohibiting future ground rent investments, and encouraging divestment from existing ground rent investments, on leaseholders and freeholders. The Government’s intentions appeared to be clear. In 2022, the Leasehold Reform (Ground Rent) Act effectively set the ground rent on new leases at zero, so the direction of travel seemed set. Further, last November, the Government launched a consultation on ground rents, which included capping the charge at a peppercorn rate for existing leaseholders.
The Secretary of State said at the time that the aim was to help protect those leaseholders who
“can be faced with ground rent clauses in their leases which result in spiralling payments with no benefit in return”.
Now, apparently, the Government have backed off from a fundamental reform and seem set on phasing out ground rents over a period of 20 years and setting a cap on ground rents at £250 per annum.
The fundamental question we have to ask is: what benefit do leaseholders accrue from paying a ground rent of, for example, £250 a year? The answer, is, of course, that ground rents really are a something-for-nothing payment—I bet you would not get away with this in Yorkshire. If the Government are determined, as they initially said they were, to bring fairness to leaseholders, then ground rents would be consigned to history.
However, on the other hand, ground rents provide a steady income for institutions as well as individual freeholders. It seems that the pressure on the Government to row back from abolition or peppercorn was sufficient to cause considerable backpedalling.
The Society of Pension Professionals—which the noble Lord, Lord Truscott, referred to six hours ago—has examined this issue as a result of much being made about the potential impact on pension funds of reducing ground rents to either £250 or zero. The following is a statement from the Society of Pension Professionals:
“Freeholders are already prevented from charging ground rents on new long leases (of more than 21 years), so it’s perhaps understandable that the government wants something similar for existing long leaseholders. The government estimates that capping ground rents at £250 a year would decrease the value of affected property assets by £14.6 bn or £27.3 bn if rents are reduced to a peppercorn. If these proposals become law, there may be some short-term impact on pension fund investors through asset values being written down. Certain pension funds may also be impacted where they own freehold titles directly, although that will be less common. The effect of these proposed adjustments is likely to be more significant for such investors than the loss of annual ground rent income over the term of the lease”—
I emphasise this next part—
“but the scale relative to total assets is probably not that significant for most in the long-run”
That is an authoritative statement, and I would like to hear a full response from the Minister—probably in writing given the late stage of the evening—as this reform is a critical part of leasehold reform. Before Report, we need to see the detailed proposals from the Government and a full explanation of their reasons.
In conclusion, these Benches want the iniquitous system of ground rents to be abolished or at least reduced by introducing a peppercorn as the set fee. I beg to move.

Lord Khan of Burnley: My Lords, at this late stage of the evening, I will be brief in speaking to Amendment 65 in the name of my noble friend Lady Taylor of Stevenage. The amendment would require the Government to publish their response to their consultation on a cap on ground rents and set out its implementation within a month of the Bill passing. It is a pleasure to follow the noble Baroness, Lady Pinnock. She described ground rent as something for nothing and something that you would not get away with in Yorkshire. Let me assure her that the noble Lord opposite can confirm that you would not get away with it in Lancashire either.
In the past five or six days we have seen a lot of press in relation to the new £250 yearly ground rent cap for 20 years. However, we still have not had confirmation here at this stage of the Bill from the Government. I want to press the Minister on the comments of the Secretary of State, who said in November that the
“consultation was launched to help protect those leaseholders who can be faced with ground rent clauses in their leases, which result in spiralling payments with no benefit in return”.
How are those press announcements happening, when we have not had a consultation analysis and we have not had feedback on the findings of the consultation? We find out in the media what the Government are thinking, and that is not right; we challenge that operation and procedure as a way of working, whereby we find in the media numerous reports about the Government’s intentions.
After my Second Reading speech, I was approached by a young man called Mike, from Manchester, who told me that his first year of ground rent went up from £250 to £350. At that rate, his 115-year lease would mean that, by the end of it, he would pay over £100,000. More importantly, he said that three buyers had pulled out from buying his house as a result of that system. I share that with the Committee, and I am sure that noble Lords have shared many other examples and have many others in their inboxes.
To finish, the 2019 Conservative Party manifesto said:
“We will continue with our reforms to leasehold including implementing our ban on the sale of new leasehold homes, restricting ground rents to a peppercorn”—
as mentioned by the noble Baroness, Lady Pinnock—
“and providing necessary mechanisms of redress for tenants”.
Even though the news that is floating about in the media is welcome, it seems that the Government have gone backwards. I would like to press the Minister on the transition period and how that will play out in future. I look forward to her response.

Lord Truscott: My Lords, I support Amendments 63 and 65 in the names of the noble Baronesses, Lady Taylor of Stevenage and Lady Pinnock, who outlined again the position on pension funds. I wanted to support what has been said by the noble Baroness, Lady Pinnock, and the noble Lord, Lord Khan of Burnley. There has been a lot of scaremongering recently about the impact on pension funds, and I wanted to reinforce that with the Minister. Quite frankly, all  this talk of pension funds and pensioners being hammered by low or peppercorn ground rents is rubbish, and it should be called out for what it is.

Baroness Scott of Bybrook: My Lords, I shall take Amendments 63 and 65 together, if noble Lords do not mind, as they both concern ground rents. Amendment 63 would require a report to be laid before Parliament, and Amendment 65 would require the publication of the Government’s response to the recent ground rent consultation and the laying of a Statement before Parliament. Before I move into what I am going to say, I want to say that I am not making any comment on any media speculation, as I said on Monday.
These amendments relate to the issues considered in the Government’s recent consultation entitled Modern Leasehold: Restricting Ground Rent for Existing Leases, which was published on 9 November 2023 and closed on 17 January this year. It sought views on limiting the level of ground rent that residential leaseholders can be required to pay in England and Wales. Noble Lords will be aware that the Government do not believe that it is appropriate that many leaseholders face unregulated ground rents for no clear service in return. There is no requirement for ground rents to be reasonable, and they can cause problems when people want to sell, buy or mortgage their properties.
The Government have already legislated to put an end to ground rents for most new residential properties in England and Wales through the Leasehold Reform (Ground Rent) Act 2022. We have also encouraged work, led by the Competition and Markets Authority, to investigate abuses of the system such as mis-sold “doubling” ground rent leases, securing commitments from freeholders to remove these costly terms, benefitting more than 20,000 leaseholders.
It is not right that many existing leaseholders are still facing these charges for no discernible service in return, which is why we have just consulted on a range of options to cap ground rents for existing residential leases. The Government are currently considering the responses to the consultation and we will set out our policy in due course. I hope noble Lords will understand that it would be inappropriate for me at this point to comment on or pre-empt any decision of the Government before a formal response to the consultation has been published, and that, given where we are, it would be premature to impose the requirements proposed in these two amendments.
The noble Lord, Lord Truscott, is right: we do not think it is appropriate that many leaseholders face these unregulated ground rents for no clear service in return. We recognise that our proposals would have some impact on the freehold market and explored this impact through our consultation. This impact is obviously being factored into the considerations of the options and is being taken into account in reaching our final policy position. The noble Lord has some very clear views on this, which I think we agree with.
At this late hour, I therefore ask the noble Baronesses, Lady Pinnock and Lady Taylor, for their continued patience as we consider what is a very complex issue. I trust that, in the light of the assurances I have given, they will be content not to press their amendments.

Baroness Taylor of Stevenage: I am sure the Minister understands that this has dragged on and on, and we are now at a very late stage of a Bill that has already gone all the way through the Commons. Quite frankly, the degree of uncertainty and instability that is being caused to leaseholders—and to freeholders, to be fair to them—is unacceptable. Yet again in this Chamber, we hear the phrase, “in due course”. I do not know what that means; it can mean anything from tomorrow to in three years’ time when we get round to sorting it out. That is not acceptable either.
We had a very detailed report from the Competition and Markets Authority, which roundly condemned the use of ground rents as a mechanism. We have heard in this Chamber over and again that this is money for nothing and that it has resulted in the most dreadful exploitation. The example I gave in Committee on Monday of an elderly couple virtually being held to ransom by the freeholder is absolutely shocking. That will be going on in millions of homes across the country. This is just not acceptable any longer. I hope that the Secretary of State will very rapidly make up his mind as to what he is going to do about this, stop being bulldozed by freeholder interests in his own party, make a decision and get rid of ground rents, once and for all. This would let people sleep easy in their beds, which they have not been able to do while this debate has been going on.

Baroness Scott of Bybrook: I think there was a question there, and my response is that we went out, quite rightly, to consult, and the consultation did not finish until towards the end of January. This is a complex issue. If we do it badly or wrong then we will make mistakes and these people will potentially be in a more difficult situation. From the end of January to April is not a long time. We are doing it as fast as we can, and we will come back to the House with further details.

Lord Khan of Burnley: I understand the response the Minister has given, but she has to understand that this consultation has its own process and in due course we will look at the analysis. I do not know whether I am accidentally calling for another meeting here, but how did we end up with reports in the newspapers? That causes more uncertainty and instability for people in their homes who are getting their information from the media. Surely there needs to be a statement or some clarification through the next stages of the Bill, so that, very early on, we can look at getting a clear, certain message out to the millions of leaseholders who have been adversely affected by the ground rent situation.

Baroness Scott of Bybrook: The Government have no control over what goes into the media, and it is something that the Government have to accept.

Baroness Pinnock: Let us end on a positive. I thank the Minister for her response. There is agreement that unregulated ground rents are unacceptable, and that some freeholders are unscrupulous and exploit their leaseholders, holding them to ransom, as the noble Baroness, Lady Taylor of Stevenage, said.
However, it would be really helpful if, as we complete the various stages of the Bill, the Minister could confirm that the Government will be able to bring forward a detailed amendment regarding ground rents before Report; otherwise, those of us who raised this issue in Committee will raise it again on Report. Unfortunately, this will put the Minister in a difficult position, one in which she has to say, “In due course,  something is going to turn up”. Let us send a message to the department that “in due course” means “before Report”.
Amendment 63 withdrawn.
House resumed.
House adjourned at 9.57 pm.